How to Record a Loan Payment in Quicken 2014 - dummies

How to Record a Loan Payment in Quicken 2014

By Stephen L. Nelson

After you set up a liability account, you’re ready to hand over a pound of your flesh — that is, make a payment. All jokes aside, as soon as you finish setting up a loan and loan payment, you’re ready to record the payment.

Recording a payment in Quicken 2014

To record the payment, follow these steps:

  1. Display the loan account.

    Click the loan account in the Accounts bar and then the Payment Details tab.

  2. Choose the Enter Loan Payment command.

    Click the Actions button (the button that shows that little gear) and then choose the Enter Loan Payment command from the menu that Quicken displays. Quicken displays the Enter Expense Transaction dialog box (see the following figure).

    The Enter Loan Payment dialog box.
    The Enter Loan Payment dialog box.
  3. Verify the loan payment details.

    Quicken should have correctly filled out the Enter Loan Payment dialog box. But this is your money, after all. So be careful. Make sure the right information appears.

  4. Click Enter Transaction.

    Quicken enters the loan payment in the liability register and bank account register. You can also print and mail a paper check.

Handling escrow accounts in Quicken 2014

If you have a mortgage, you know the drill. Although your mortgage payment may be $536.82 per month, your friendly mortgage company makes you pay an extra $125 per month for property taxes and other such things. In other words, even though you’re paying only $536.82 per month in principal and interest, your monthly payment to the mortgage company is, according to this example, $661.82.

The mortgage company saves this money for you in an escrow account or a set of escrow accounts. A couple of times yearly, the mortgage company pays your property taxes; and, a time or two per year, it pays your homeowner’s insurance. If you have private mortgage insurance, it may pay this fee every month as well. And so it goes.

How do you treat this stuff in Quicken? You have a couple of choices.

The rough method of recording escrow accounts

Suppose that you do pay an extra $125 per month. You can treat this extra $125 as another expense category, such as Tax:Property or Other Housing or Property Expenses.

Nice. Easy. No fuss. The following figure shows a sample Split Transaction window filled out this way.

A mortgage payment with an escrow account treated as an expense.
A mortgage payment with an escrow account treated as an expense.

This approach doesn’t tell you how much moolah you have stashed away in your escrow accounts. It also doesn’t tell you how much you really spend in the way of homeowner’s insurance, what you’re entitled to claim as a property tax deduction, or how much they’re bleeding you for private mortgage insurance.

To get these figures, you have to peruse the monthly and annual mortgage account statements — that is, if you get them. Or you have to call the mortgage lender and rattle a cage or two.

Still, with all its shortcomings, this easy-to-use method works just fine for a lot of folks.

The precise approach to recording escrow accounts

If you can’t live without uncertainty, there’s another approach to record escrow accounts. You can set up an asset account for each escrow account for which the mortgage company collects money.

You set up asset accounts like you set up a checking account. To do so, follow these steps:

  1. Display the Quicken home page or some other Quicken tab that shows the Accounts bar along the left edge of the window.

  2. Click the Add an Account button to indicate that you want to create a new account.

  3. As you step through the seemingly interminable account setup process, identify the account as an asset account and give it a name.

  4. Tell Quicken how much money is in the account as of a specific date.

    If you’ve set up an account or two in your time, this process should take you about 40 seconds.

After you set up your asset account and record its current balance, you’re ready to cruise. Record payments in the escrow as account transfers whenever you record the actual loan payment.

You need to do one other thing. When you set up an escrow account, you must record the payments that the bank makes from your escrow account to the county assessor (for property taxes) and to the insurance company (for things such as homeowner’s and private mortgage insurance). You don’t know when these payments are really made, so watch your monthly mortgage account statements.

When the mortgage company disburses money from the escrow account to pay your first property tax assessment, for example, you need to record a decrease equal to the payment for property taxes and then categorize the transaction as a property tax expense. This process isn’t tricky in terms of mechanics. The account increases after every loan payment and decreases after a disbursement.

Basically, the Asset Account register mirrors the Checking Account register. The only difference is that the Payment and Deposit fields are labeled Decrease in the latter and Increase in the former. To get to this account’s register, click its name in the Accounts bar.

If you use this approach, you can track escrow balances and escrow spending precisely. You can, for example, pull your property tax deduction right from Quicken.