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How can I automate mortgage payments

Adience

Hi there,

Is there a way to make Quicken Classic Windows to automatically split the mortgage payment entry my checking account to (1) paydown the mortgage loan principal (i.e. reducing my mortgage debt), and (2) add to an interest expense every month? So far I have been doing this manually.

some additional notes:

I am a US based Quicken User. but the mortgage and the checking account are with a Canadian bank (RBC), which Quicken doesn't support. So everything are manual entries.
The mortgage is on a floating rate, so rates can change any time.

Thanks!

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Tom Young

Are the payments made in Canadian dollars, or US dollars?

Assuming for the moment this is a US dollars loan, then the answer to your question as to "automation" is Yes.

Since you've already been making payments for a while then the way to do this is to create a new mortgage loan Account in Quicken and using the Quicken loan "wizard" to set up the loan as it currently exists, i.e., current loan balance, current remaining term, current interest rates, and using a "start date" as of the date of the last payment (assuming it was on time). As part of the setup of the loan you tell Quicken what checking Account is used for the payments and instruct Quicken to make the correct entry - split between principal and interest - into the checking Account on the payment due date. (If you wish, you can tell Quicken to make this entry "X" number of days before the payment is actually due so that you have visibility to it for cash management purposes.)

Quicken can handle rate changes. As the rate changes you access the loan's details and tell Quicken what the new interest rate will be.

If you have Canadian dollar checking Account and a Canadian dollar payment obligation I'd expect that to work similarly, but I don't really know.

[Deleted User]

@Adience if the mortgage is truly with the Canadian RBC and not the US based RBC, setting up automated mortgage loan payment splits on the US version of Quicken would not be possible. This is because Canadian mortgage loan calculation methods and terms are not the same as US mortgage loans.

Adience

Yes, it's a Canadian RBC checking account, and a Canadian mortgage from RBC.

@Tom Young I did try the wizard in the past but the amortization was never correct, now I see why thanks to @CaliQkn 's comment.

On payment terms, I did find it surprising when I first moved to NYC that the US market don't offer 5 year rate terms like they do in Canada. i.e. I have a 25 year mortgage, and I lock in "floating or fixed" only for the next 5 years.

Womp womp, so back to manual…..

thanks for the advise though.

Adience

actually I have another question if you don't mind @Tom Young and @CaliQkn

So right now, the way I do it manually is this, all in CAD$ and made up numbers. First day of every month RBC transfer $1000 from my checking to my mortgage account. When I put this in Quicken, (both accounts are designated as CAD), I actually record 2 entries.

#1 is a $700 "TRANSFER" to the mortgage account, which reduces the mortgage debt amount.

#2 is a $300 interest expense.

This seems fine from an accounting stand point. But when I go to the SPENDING tab in Quicken. If I look at a summary of my month spend, I see the interest expense as a category but it's as if I am not paying any mortgage payment because the $700 is a transfer between 2 accounts.'

How do I reflect the $700 in the spending tab?

[Deleted User]

@Adience maybe @Tom Young can provide more details and clarification, but from my understanding the $700 principal payment is not an expense because you already incurred the expense when you took out the loan (principal). The $700 principal payments are simply a transfer from your checking account to your loan account to pay down the loan principal. The Loan Expense typically refers to the costs associated with borrowing, such as interest payments, loan origination fees, and other charges incurred over the life of the loan.

NotACPA

@Adience, @CaliQkn got it right re: the principal payment not being an expense. If it were, you'd double your expense … once when you originated the mortgage and again when you paid it.

What you need to look at is a Cash Flow report, where the principal payment WILL show as an outflow.

Adience

@NotACPA where can I find a cash flow report? I've been wanting that.j

an argument can be made that it's more benefit for helping users to plan every day finances, it's better to amortize the property purchase price over the course of the loan, i.e. actually record the parodic mortgage payment overtime, than recording it as a one time purchase up front.

NotACPA

https://community.quicken.com/discussion/comment/20492525#Comment_20492525

Reports, Banking, Cash Flow.

Tom Young

@Adience

"Transfers" can be made to show up as a quasi-expense or quasi-income in a Spending Report (e.g., "To Mortgage") but I don't see any way to duplicate that on the Spending Tab.

Adience

oh interesting, I've not used the Report functions at all all these years.

[Deleted User]

@Adience I've been looking at the options for setting up a Canadian mortgage loan in Quicken Windows, and at first glance, it does look like that all the options are there to set up a Canadian mortgage loan. Whether or not they work the way they should is another question. And, unfortunately, this is something I cannot test or verify. So now I need to change my answer to you from "No" to "Maybe".

It could be that the P & I splits are off because some of the loan terms, or starting balance, set up in Quicken need adjusting. But as @Tom Young mentioned, it is easy to update the loan rate (or loan terms) when the loan is renewed.

Tom Young

I did ask Google for the differences between Canadian and US mortgages but my knowledge here isn't particularly deep.

What seemed to be common in Canada was 25-year mortgages with 5-year terms and an interest rate adjustment each 5 years. Since interest is paid in arrears in the US and Canada (apparently) then if the loan Account is correctly stated - correct balance, correct remaining term, correct "origination" date, and so forth - I'd expect that simply changing the next term's interest rate every 5 years would work correctly.

However, there was some discussion about both the interest rate and the term being changed and if that's the case then here in the US you'd need to "close out" the old loan by transferring the balance to a new loan Account, establish the new terms for the "new" mortgage, and then deleting the loan "wizard's" opening balance entry to avoid doubling up the loan amount.