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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