Mortgages

What a loan is in EscBooks#

A loan is money the business owes a lender: a mortgage on a rental, or a loan with no property behind it. It's listed on Mortgages, and on its property's page under Loans, with what's still owed.

Each monthly payment splits three ways, as your lender's statement shows it:

• Interest: the cost of borrowing. It's an expense, Mortgage interest on the property: Schedule E line 12 (Form 8825 line 9, Form 1120 line 18, Schedule C line 16a). A loan on no property records it as Interest.
• Principal: pays the loan down. You owe less, but it isn't a cost and doesn't lower profit.
• Escrow: money the lender holds to pay your property tax and insurance. It's still yours, an asset, until the lender pays them.

Adding a loan#

1. On Mortgages, click Add Loan.
2. Type the Lender and pick the Property (or No property). A Name is optional, like Elm St mortgage.
3. Enter the loan's terms from your closing documents or a lender statement: Amount borrowed, the yearly Rate (%), Term (years), the First payment date, the Monthly payment of principal and interest, and the Monthly escrow. The dialog shows the usual payment for those terms, and how the first payment splits.
4. Under Starting in EscBooks, pick A new loan (it owes the full amount from the day it's borrowed) or A loan already being paid. For one already being paid, enter what's Owed and As of from the lender's last statement.
5. Click Add Loan.

Edit on the loan's page changes its terms. Once the lender has paid anything from its escrow, a loan can't be deleted: Archive it when it's paid off.

Recording a payment#

1. On the loan's page, click Record Payment.
2. The Interest, Principal and Escrow are proposed from what's owed now: a month's interest on the balance, the rest of the payment as principal, and the monthly escrow.
3. Change them to match your lender's statement, which is the record. The Total paid is the three together.
4. Pick the day it was Paid on and the account it was Paid from, and click Record.

• The interest is listed on Expenses as Mortgage interest on the property, from the same account. It follows the payment: change or remove the payment, and the expense changes or goes with it.
• What's owed is the starting balance less the principal paid since. The loan's page shows it beside the lender's figure when you've typed one in.
• Lenders round each month's interest to the cent, and a payment that arrives a few days early or late can shift a few cents between interest and principal. Go by the statement.

Payments on a bank statement#

When you review a bank statement, pick Loan payment… under Properties in What is this? for the withdrawal, then the Loan. Its interest, principal and escrow are proposed as above, and must add up to the line to the cent. Click Mark as Loan Payment: the payment is recorded with the line, so it isn't counted twice. See Reviewing statements.

Property tax and insurance paid from escrow#

When the lender pays your property tax or insurance from escrow, that's when it becomes a cost. Record each payment from the lender's yearly escrow statement:

1. On the loan's page, click Paid from Escrow.
2. Under What it paid, pick Property tax or Insurance, and enter the Amount and the day it was Paid on.
3. Click Record.

It's an expense on the property (Taxes & licenses, Schedule E line 16; or Insurance, line 9), paid from escrow rather than a bank account, so it never shows on your bank statement or Month-End.

The Form 1098 check#

Each January your lender sends a Form 1098: the mortgage interest it received in the year (box 1) and, often, the property tax it paid from escrow (box 10). On the loan's page, Form 1098 for the year takes Box 1: mortgage interest, Box 10: property tax paid and the Balance owed at year end from the lender's statement. EscBooks sets its own figures beside each, so a difference shows.

• A difference in interest usually means a payment is missing, recorded in the wrong year, or split differently from the statement.
• A difference in property tax usually means a payment from escrow isn't recorded yet.

Loans in your reports#

• In the General Ledger, each loan is its own liability, Loan payable with its name: it starts at what was owed and goes down by each payment's principal. Escrow paid in goes to Escrow held by lenders, an asset, and comes out of it as the lender pays tax and insurance.
• On Reports → Taxes, the interest is on line 12 of the property's Schedule E column.
• Principal and escrow never count as costs in the profit and loss. See Reports and taxes.