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I’m confused

How to properly set up a Mortgage account?

I've been trying to set up a new mortgage, but am just totally
confused on this.. is there a web-page/pointer to good suggestions
on how to do this?

This mortgage has a principle, fixed interest rate and an escrow
account.

Thanks!
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  • The MD manual is a bit lean, but setting up a loan type account should be straight forward, ie.do a new loan account and enter the fields.

    You need an account, and a category, to select in the loan setup for escrow and interest, respectively. If you don't already have suitable ones setup when you build the loan, do them first or choose two you do have until you have the loan finished, make new ones and edit the loan to them.

    Make a test payment to check that it splits the amounts it should to the separate registers and updates the loan stats correctly. Either leave the pyament to use for when you really pay or delete it until you do make a payment.

    I have not had to do a loan payment in MD yet so I do not know for sure it works correctly. If it does not, you wiill need to post what you find for help.
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  • That sounds great... but, the way this worked out some money from the closing went to the interest and escrow accounts.. So, I made a "payment" that contributed to interest+escrow and didn't touch the principle.

    I'm not sure how to reflect that in those accounts, except to set them
    up with a non-zero initial balance???

    I tried to just let Moneydance set up the loan account, and the monthly
    payment it calculated was $1000 more than the bank says.. also, I
    don't know what portion of my monthly payment will go into the escrow
    account.

    What I'd like is to write a check in the checking account, make it's
    account be the mortgage and have moneydance split the payment
    into the 3 components, principle, interest & escrow. If Moneydance
    doesn't agree with the bank, how do I adjust these amounts without
    just doing a manual split when I write the check? I mean, one possibility
    for tracking the loan is to simply have 3 money-dance accounts
    (principle + escrow + interest) and do a "by-hand" split with each
    payment... but, that would seem to defeat the intent of having software
    to do this...
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  • You could do the interest+escrow payment as an initial balance or an ordinary manual split payment transaction. Either should work. However, if any part of the initial interest you paid was financed in the loan, you probably should enter that amount's percentage in the loan setup "points" field so that it gets automatically added to the loan amount and figured in the loan's payment.

    The loan account setup also has fields for setting the escrow and payment (if you want something different than the calculated amount) amounts and MD's calculation is probably correct for normal mortgage interest rate/accumulation with whatever fixed monthly escrow payment you enter. If you do not know the escrow amount, it is probably the difference between the MD calculated payment and your real payment. If you specify a payment amount in setup that is more than calculated, it will post the excess to the loan principal to payoff sooner; I don't know what it would do if you specify less.

    When you do a payment to the loan account, it automatically splits it to the escrow, interest and loan accounts. It remembers the splits and shows you how much is going to each account. You can also adjust them, which you need to do for changes in rate or escrow during the loan's lifetime, such as an excess payment to principal.

    If you set up a loan and look at the loan register you should see a right hand sidebar that gives the loan's remaining payments etc after each payment.
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  • I see the window for setting the escrow account...

    But, I've not gotten a loan from a bank yet where MD's calculations
    of interest matched the banks... (and, I'm waiting on Chase bank to
    produce their idea of an amotorization schedule - the manager, and
    the manager's calculator agree with MD, but the bank doesn't :-) )

    My situation is that some of the closing costs went into paying the first
    few days of mortgage interest, and to set-up an initial value for
    the escrow account. I can certainly set up the escrow account in MD
    with an initial value - but I need to throw-in this interest into the "Mortgage Interest" category. But... there is no transaction, I didn't actually
    pay anything (and, while I'm responsible for the mortgage payments, someone else put in the down-payment) - so I have no transaction to
    originate the interest... but, I need to reflect it somewhere.

    So - I'm having problems figuring out how to reflect all of this in MD, and it would be nice if I didn't have to do a bunch of by-hand splits...
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  • You definitely have one of those creative financial situations. You may need to get hands-on help from an account.

    What you seem to be describing is a loan where the first (re)payment is different in amount from the rest. The only built-in function MD has for handling such a situation is the "points" field, which covers the normal home finance situation. You enter the percentage of the loan that the payment included in the loan amount is and MD figures the correct schedule. Normally, that payment is an "origination" fee, not loan interest, and tracked separately for (US) tax purposes. I don't know how MD tracks it, or even if it does, other than the initiall setup. You would need to try it to see.

    If a payment (vs origination fee) was included in the loan amount and is different from the rest of the payments you will need to make, I think you would need to know what the loan balance is at the time your "normal" payments start and how many are left to enter in the loan fields for MD to match your bank.

    Worse case, you can set a MD liability account for the loan principal and expense categories for escrow and interest, set their initial balances to whatever match what your bank says you owe and paid, then, manually split your payments as correctly as you can. You won't have any automation (like running balance & interest projections), but it will work. I did this with my loan because it did not import as a loan account when I moved from Quicken and I did not bother fixing it as I only had a few payments left.

    The down payment should not even show in your MD (you did not make it), unless you want to include it in an asset account for your house. If so, it would be a transaction (or transaction split, say of the original balance) with appropriate ("gift" income say) category, I use such an asset with the initial balance set as the purchase price and add any "real" improvement costs for cost basis tracing.

    I think this about all I can do for you. Good luck, especially if your bank can't figure the payment schedule out correctly,
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  • I’m frustrated
    Thanks for all of that...

    Here's what I've done so far:

    I created a loan account, and when I got the 2nd statement (which had a more correct figure for the escrow charge) I entered all of that into the loan account fields. The interest is directed to the "Mortgage Interest" account, and the escrow amount is directed to a new "Mortgage Escrow" account.

    Then, I simply went to the Mortgage Interest account and added a transaction for the interest paid at closing, and similarly, visited the Mortgage Escrow account to enter a transaction for that amount that was paid at closing (I set their accounts as "cash".)

    Wonderfully, MoneyDance and the bank now agree on the monthly payment!

    So - I thought, I would go back to the previous entry in my check register, which has an account of "cash" and point it to the loan (change its account to the particular loan) - hoping the payment would now be split into its principle+interest+escrow amounts. However, that didn't happen - Moneydance deducted the entire amount from the mortgage principle.

    Then, I thought I was likely confused... there are hints in the doc that you have to have reminders enabled for MD to properly split these transactions. So, I edited the Mortgage account and entered a reminder for the 20th of each month.

    I then reset the previous check entry to "cash" and then tried to set it again to the mortage account - once again MD simply deducted the entire amount from the principle.

    At this point - I'm at a loss for how to get MD to automatically split my payment into its principle+interest+escrow components... should I be able to do that?
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  • AHA!

    I stumbled into it.. you have to set up the reminder, then you have to _use_ the reminder.

    When I set it up - I then used it and gave it the previously existing check number... with that, the reminder properly entered the right values and everything now agrees with the bank statement. Also, it was interesting that the (now "in the past") reminder didn't put a duplicate entry into the check register, it recognized I was referring to an already existing entry and just "ran with it" (so, my checking account wasn't doubly reduced by the loan payment.)

    At this point, I think I'm all set - ready-to-go.

    Might want to beef up the documentation for Loans to indicate that simply the presence of the reminder is not sufficient - you actually have to "click" on the reminder to get it processed.

    Also - I'd appreciate a way to get a single-view summary of the loan status. Right now, to see the amounts in escrow & interest-paid and remaining principle, I have to visit 3 dialogs, which aren't easily accessible.
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  • There is a "loan payoff" item that you can add to your "home page" (the overview screen) using the home page preferences. It has a short summary of loan status that might be what you want.
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