Marking mortgage payments as an expense

[Paul Harouff]

On Thu, 2003-01-30 at 01:49, Kevin Benton wrote:
> To address this issue, I would consider doing this:
> 
> Mortgage Payment	        $(750)
> Mortgage Principal         $100 (Your future asset, Unpaid balance is
> lender's current & future asset)
> Mortgage Interest          $525 (Your current liability, Lender's current
> asset)
> Mortgage Insurance Escrow   $50 (Insurance Co's asset, Lender's liability)
> Housing Tax Escrow          $75 (Government's asset, Lender's liability)
> 

This method works okay for regular payments that are the same every
month so the memorized transaction remembers the amount. For example, I
use this type of split transaction for my salary pay stub direct
deposits. But I've found that transactions involving interest or finance
charges that change every month are a real pain with split transactions.


Instead I do the following:

Mortgage Company
Asset->Bank Account		$(750)
Liability->Mortgage		$750

Mortgage Interest
Liability->Mortgage		$(525)
Expense->Mortgage Interest	$525

Transfer to Escrow
Liability->Mortgage		$(125)
Asset->Escrow			$125

This leaves a $100 in the Liability->Mortgage account reducing the
principle balance on the loan.

The advantages this way are:
(1) You don't have to turn on splits to see the entire transaction. This
is the biggest disadvantage I see between using GnuCash instead of
Quicken. Quicken lets you check a box to turn on splits for just a
single transaction. You don't have to go to the menu to toggle the whole
display.

(2) To change the mortgage interest every month, as you enter the
memorized transaction you just hit tab and change the number. You don't
have to change all the other values to balance the transaction like you
would in a split transaction.

(3) It's easier to reconcile the accounts, since all three of these
values are on the mortgage statement, not on your bank statement where
they would appear with a split transaction.

(4) You can enter the data at different times -- I usually enter all the
monthly bills at one time from the checkbook (as transfers to a
liability or expense depending on payment type) and reconcile the bank
statement. Then I get all the loan statements,  credit card statements,
etc. and enter the purchases and finance charges into their respective
accounts (as transfers to an expense) to get the new loan balance. Using
split transactions you have to have all the data in front of you at the
same time.