I have 2 different loans that I split the payments into 3 categories for each payment. One is to an escrow account which pays my prop taxes and insurance on an annual basis, one payment is to principle for the loan, the last is for the interest. When I classify principle and interest those properly account in my cashflow statement though my income statement does not show them for tax purposes. The escrow payments show up on the income statement, but do not reduce my monthly cashflow. How do I need to categorize them to show up correctly?
@mccartneyproperties Good questions. Mortgage payment splits, escrows, etc. are discussed in detail in the Split & Categorize Mortgage Payments help article. Take a look and reply here with any follow-up questions.
Note that mortgage interest is only shown on the Net Cash Flow report, not the Income Statement. Our Income Statement is focused on operational outcomes, while all financing activities are shown on the NCF instead. Also keep in mind that payments into escrow accounts are generally reported as âTransfersâ since they are not actual expenses. Payments from escrows to cover taxes, insurance, etc. can be recorded as actual expenses when they occur, in order to tie out your reporting.
1 Like
So to properly account for the escrow transfers on tax I should put the payment I make into the category of general escrow transfers, then the actual payments from that escrow account should be categorized as âProperty Taxesâ or âRental Dwellingâ insurance payments, not transfers?
@mccartneyproperties Just to clarify, the approach discussed above is to categorize payments you make into escrow accounts as âMoney Outâ under Transfers. If you then receive a disbursement from this account (or your lender pays taxes or insurance directly), thatâs a âMoney Inâ transaction under Transfers AND itâs an actual expense (Money Out) transaction under whatever actual expense category was paid. Does that clear things up?
I think so. If Iâm reading correctly that would mean there would be 1 (or multiple transactions) for adding to the escrow account. Then 1 transfer back to my account in the balance of the expense. Then 1 payment to taxes/insurance as the expense. It doesnât look like I can pay the expense directly from the escrow transfers category, so Iâd need the two transactions.
@mccartneyproperties Youâve got it figured out!
1 Like
This is really frustrating. I imported my mortgage payments from the mortgage company.
I donât want to manually split every single one, for multiple loans. That would be very time consuming.
Trying to fix via CSV looks like a tough task too, since for each loan, the escrow transfer has changed over time.
A workable fix would be the ability to do a manual multi-edit that lets me add a split to all transactions for the P+I, and a âremainderâ split (variable per transaction based on the total of each transaction) that is put into general escrow.
An even simpler fix to implement, would be supporting multi-edit of the Amount field. I would manually change all my mortgage payments to P+I only, and pretend the escrow account does not exist. Then manually fix each tax and insurance payment to be money-out (as it incorrectly imports as money-in).
That periodic fixup would still be a pain, but much better than going through the slow split process for each payment of each loan on multiple properties.
ok. I think I figured out a work-around I can tolerate. Leave all the imported transactions as-is, with full P+I+escrow catagorized as general Mortgage category. Each case where there is a payment from escrow, (which is also imported), create a transaction for the same amount that is âmoney inâ from Mortgage for the amount of the tax or insurance payment. Basically this is using âMortgageâ category as the escrow account.
And to make the above âduplicateâ entry easier to create (same date, amount (reversed), notes, but just different category), I edit the tax or insurance expense, and then create a split, and put the full amount in each split, but change category to Mortgage and make the full amount positive there. The two slits total to 0 (which makes sense, as Iâm just moving money out of one account into another).
@stevef4571 Thanks for sharing your process with others, itâs much appreciated.
Weâre aware of how time-consuming this activity can be when your lender doesnât provide us with the breakdown of each payment. Some lenders do this, others donât. The ratio of interest to principal changes every month, and as you noted above, the escrow amounts also fluctuate from time to time. Some investors also make extra principal payments or âround upâ to whole dollars on each monthâs payment. This makes it very challenging to apply a fixed amortization schedule and do the splits automatically.
That said, we have now implemented some new logic whereby weâll track changes in the outstanding loan balance over time in order to automatically split off the principal portion of each mortgage payment.
You should see this in action on newly imported mortgage payments from July 1, 2020 going forward. Please let us know if itâs helpful!
That is great!
Maybe some logic could be used to automatically figure out if the lender is providing escrow info, and automate my approach above for those that do not.
@devin
Still confused about recording these mortgage pmts correctly. Can anyone tell me if my breakdown is correct?
For Example
Mortgage pmt is $900 ($200 Principal, $300 Interest, $400 Escrow)
Also, $50 is disbursed for PMI each month
Under Transactions each month 3 transaction are brought in from my attached accounts:
-$900 â The checking acct used to make the payment
-$900 â The mortgage accouunt
+$50 â PMI Disbursement, mortgage account
Now the question is, how do I properly split and catagorize these payments?
Should it be:
-$900 from checking account is a âTransferâ
-$900 on mortgage account gets split 3 ways;
-$200 âMortgages & Loans > Mortgage Principalâ
-$300 âMortgages & Loans > Mortgage Interestâ
-$400 âMortgages & Loans > General Escrow Paymentsâ
+$50 âTransfers > General Escrow Paymentsâ
Then, if the above is correct, do I manually enter 2 more transactions?
-$50 âTransfers > General Esrow Paymentsâ
-$50 (???) This should be an PMI expense transaction but I donât know how to catagorize; Under âInsuranceâ there is no option for âPMIâ and I could use âMortgages & Loans > PMIâ but then, does it report properly? I appears that would report as a Capital Expense but is it one?
1 Like
@bonnievsdirt Did you ever get confirmation that this is the best way to split out the mortgage payments?
I followed the guidance in this thread with respect to splitting out Principal, Interest, and Escrow. However now Iâm realizing that my balance sheet is double counting my Escrow Balance under the Assets category. It appears as though itâs pulling the current Escrow balance from my lender in one line item, then also pulling the escrow balance from the Transfers âGeneral Escrow Paymentsâ section. How do I go about resolving this?
2 Likes