Setting up a mortgage and transactions entered in arrears (4 numbered questions)

Peter Underwood peterunderwood1 at gmail.com
Wed May 4 13:17:00 EDT 2011


Thanks Tommy that was very useful.

I'll try starting again from the settlement statement onwards. The mortgage
statements are all online and I can update monthly and of course get my
year-end statement online. So I'll follow your suggestions. Incidentally,
the basic payment on the mortgage itself is constant which of course means
the interest payments reduce and the capital payments increase as time goes
on. As this is is normal, I assume the Assistant takes care of this part. I
have only just discovered that I can access the calculations when the escrow
changes (changing the total payment of course). I'll take your suggestion -
running up an adjustment each month should be fairly easy now that you've
explained things. I suppose I was expecting the Assistant to be a miracle
worker whereas in fact it simply does a bunch of sums for me and sets up the
scheduled transactions. That was my error but GnuCash still stands out above
the other accounting software I have tried because it seems more flexible
whereas they seem to tie one into their way of doing things.

I'll try your suggestions. Once I get the thing up to date, it should be
fairly easy now I know not to be over-dependent on the Assistant.

Thanks again.

Peter

On Tue, May 3, 2011 at 9:54 AM, Tommy Trussell <tommy.trussell at gmail.com>wrote:

> Peter...
>
> If I understand your question 4, the answer is you can enter and/or
> edit whatever transactions you need in the correct accounts.
>
> The answer for the other questions, I think, might be that you COULD
> just use the assistant and have it generate ALL the transactions since
> you created the mortgage since 2005, edit them to reflect reality, and
> rebalance your bank account to clear the transactions that occurred
> before you started using GnuCash. To do this you must review your
> mortgage statements and enter all the escrow money paid out and in.
>
> HOWEVER I will tell you what _I_ did...
>
> The Mortgage/Loan Assistant (formerly called a "druid") is not "smart"
> enough to handle some important things, such as making additional
> payments on principal. It also doesn't help you when there are the
> (inevitable) changes to escrow payments, etc.
>
> It CAN help you set up a few of the accounts you are interested in,
> and get you started. After that, you will want to modify the recurring
> transaction occasionally (such as when the Escrow payments change,
> often once or twice a year).
>
> I suggest you can put in FIXED principal and interest payments and
> IGNORE the fact that they are not correct each month; remove the
> formula in the scheduled transaction and insert a fixed amount that
> closely approximates the amounts, making sure the TOTAL is correct
> (the principal plus interest plus escrow). Assuming you have a fixed
> rate, the mortgage company or bank tries very hard to make the total
> fairly consistent from month-to-month, and for your purposes you want
> the bank transaction to always be correct when balancing the bank
> statement, whether you pay by a draft or writing a check.
>
> Every three or six months (however often your lender sends you an
> updated statement) go back and update the interest and principal
> amounts to reflect reality. You can even "balance" the principal
> account if you want, but you are more likely to want to balance your
> Escrow account, as well as enter any payments that have been made from
> it (usually insurance, property taxes, and whatever else gets paid out
> of Escrow).
>
> This is the strategy I used for my mortgages -- it would have been
> nice if the assistant could have handled the additional principal
> payments I made each month (which cut many years off of the life of
> the mortgage), but it didn't, and I didn't find it too burdensome to
> update the amounts each time I got a statement.
>
> The reason I suggested you might not need to balance the principal
> account "to the penny" with each statement is that in just about any
> instance it matters more what the mortgage company says the amount is
> ... when you get ready to payoff, you will get a payoff quote based on
> a certain date, and after you pay them they will ultimately refund any
> Escrow and any Principal overage, and THAT is where you will want the
> Escrow and Principal accounts to balance to zero. Before that, a
> ballpark amount is probably good enough. And for tax purposes each
> year, it matters more what the mortgage company reports to the
> government than what you think you paid, so the interest payments
> don't need to balance, either.
>
>
> I know this may not be what you were hoping to hear... it WOULD be
> cool if the mortgage assistant could handle all this stuff properly. I
> don't know whether it would be best to model it on the HUD statement,
> however... in my experience (based on only two mortgages in my
> lifetime so far) the HUD statement reflects the situation at the time
> of the sale (a one-time event) but the ongoing payments get reviewed
> whenever the mortgage gets sold to another bank or the Escrow is
> readjusted based on its outpayments.
>
> SO balance the past transactions whenever you get a new statement, and
> occasionally readjust future scheduled transactions to match where you
> are on your individual mortgage payment schedule.
>
> > Any ideas, suggestions will be gratefully received! And if I am asking
> the
> > question in the wrong way and someone actually sees my questions this
> time,
> > please advise me how to ask them :)
>
> I think your questions were fine. Since you have been using a homebrew
> spreadsheet, you probably know a lot more about the "proper" way to do
> this anyway, so you might consider specifying how the mortgage
> assistant could be improved. Last I remember the discussion was that
> the GnuCash backend doesn't (yet) have an important function that
> would be needed for scheduled transactions to handle additional
> principal payments.
>
> There may be some existing bugs and/or feature requests you could vote
> for... and maybe you even have the coding skills necessary to push the
> envelope yourself...
>
> > Thanks.
> >
> > Peter
>
> I hope that helps.
>
>              --Tommy Trussell
>
> > -----
> > Please remember to CC this list on all your replies.
> > You can do this by using Reply-To-List or Reply-All.
> >
>



-- 
Peter Underwood
============
178 Memory Lane
Franklin
GA 30217
USA
Tel: +1 706 675-1412
Email: peterunderwood1 at gmail.com


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