[GNC] Dealing with escrow account

[Jediator]

In addition to setting up the proper account structure, I would make 
your mortgage company as a vendor and set up a bill each month with 
split transactions to map to mortgage-related subaccounts (e.g, property 
tax, insurance, interest and principal) as such:

  * Mortgage Payment
      o PMI
          + Tax (expense)
          + Home Insurance (expense)
          + Managment Fees (expense)
          + Escrow (remaining asset, balance may go negative)
      o Loan Payment
          + Principals (asset or loan)
          + Interests (expense/deductible)

The advantage is that you have a vendor report to track all mortgage 
payment and each bill payment will automatically split the 
transactions.  You may set up a limit in tax and insurance account each 
year so that when the payment reaches the max, it goes to the escrow 
account (remaining balance), and reconcile these accounts at manually at 
tax time.  Hope this helps.

-- JC

On 11/1/23 1:22 PM, Alan Johnson via gnucash-user wrote:
> I structure my mortgage accounts like thus:
>
> - Asset account representing the property value (sub accounts for land
> / buildings as needed)
> - Loan/Liability account representing the amount borrowed which is
> transferred to the Property Asset account
> - Closing costs from the HUD-1 should also be accounted for as
> expenses, along with contributions from checking/cash for down payments
> - Asset account for escrow (initial transfer from purchase transaction
> / liability account to fund the account at closing)
>
> - Payment from checking goes to the mortgage liability account
> - I assess interest expense as an increase in the liability account
> - Transfer escrow payment to escrow account out of (increase) liability
> account
>
> Although not expressly listed, the balance applied to the loan balance
> is the principle payment that reduces the outstanding amount.  The
> balance of the loan account should then be the pay off amount of the
> loan, adjusted for accrued interest since the last statement/entry.
>
> Escrow account pays out expenses (property taxes, hazard insurance,
> etc.) as expense line items.
>
> Tracking the escrow balance separately is also useful for tracking
> refunds due to you when you sell and/or pay off the loan.
>
> Alan
>
> On Wed, 2023-11-01 at 11:10 -0400, Michael or Penny Novack wrote:
>> On 11/1/2023 12:03 AM, Edwin Booth wrote:
>>> Hi. How do y’all deal with a mortgage escrow account? Specifically,
>>> each
>>> month I pay into the escrow account along with my monthly PMI
>>> payment. It
>>> is all an expense. But when the mortgage company pays out money
>>> from that
>>> escrow account (for taxe and insurance payments) how do you account
>>> for
>>> them in GnuCash? Or do you just wait until tax time and record it
>>> on your
>>> return w/o even putting into GC?
>>>
>>> Thanks, Edwin
>>
>> "each month I pay into the escrow account along with my monthly PMI
>> payment. It
>> is all an expense."
>>    
>> No it is not. In order to learn bookkeeping you need to unlearn the
>> mental habit "if money leaves my pocket, an expense ---- and if money
>> not leaving my pocket, not an expense."
>>
>> When you make a mortgage payment it is a SPLIT transaction. What you
>> pay (a credit against your bank account) and debits to THREE
>> accounts. Only one of these, mortgage interest would be an expense
>> account. The escrow account is an ASSET, your money being safely set
>> aside in order to pay expenses when they come due. Expenses like real
>> estate tax, water and sewer bills, property insurance bills, etc. It
>> is quite possible that the lender will send you a statement for that
>> account just once a year. You might want to be using the previous
>> statement to enter ESTIMATED transactions on estimated dates and then
>> reconcile (manually) when your next statement gives actuals.
>>
>> Michael D Novack
>>
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