Mortgage does not calculate principal/interest

[Ron Carr]

Loan account with interest entered and Money 2007: I make a monthly payment,
scheduled under bills, to a Home Mortage account.
This account is set up as a loan account, with the interest entered and an
account specified to receive the interest: however there is only one entry,
for the full amount, to the Home Mortgage account. I thought interest would
be calculated and a transaction created to go to the interest account...
Any idea why this is not happening?
Thanks.
Ron

 

[Dick Watson]

What edition of Money? If Deluxe or higher, are you using Advanced Register
and a Loan Payment transaction type?

(Dear MS: whay can't we break the NG up to match the balkanization you've
doen to the product??!?!?!???!)

 

[Ron Carr]

It is Deluxe, and I am in Advanced Account Register. However, I see no Loan
Payment transaction type, just Withdrawl, and then Upcoming Bills etc.
However, my mortgage payment is an automatic payment thru bill payment:
perhaps this is the problem.
Thanks.
Ron

 

[Dick Watson]

Oh, It also occurs to me. Are you using Essential or Advanced Bills? I'm
betting Essential. Turn off everything Essential and turn on everything
Advanced. Essential stuff is for people who want to **think** they are
tracking stuff but wouldn't know the right answer from the wrong. Your very
question indicates you are qualified for Advanced everything.

If that's not the problem, then the following may apply: Let's ignore Bill
Payment and downloaded data and all of that phoo phoo and talk how Money
wants this setup.

There is an Account Type called Loan Account. You define a Loan Account in
terms of a initial prinicipal balance and a payment amount (PI, or Prinicipal
plus Interest), number of payments and payment frequency. Let Money figure
the interest rate. It should be in the ballpark of what your bank says, but
may not match. This will also allow you to define what expense category you
want to assign the interest costs for the loan to. It will also allow you to
setup things like escrowed amounts but for now let's stick with the
fundamentals. It will even allow you to setup the scheduled Bill. (Again,
whether epay or what is not the point here--we are working the basics.) (If
you don't want to track all of this stuff, there are different ways to set it
up. I suspect you've done one of those ways and not known it. But none of
those ways will automagically calculate prinicipal from interest within a
payment.)

This account represents the mortgage liability in Money.

To reduce this liability, you enter "Loan Payment" special category
transactions--down with things like Transfer and Credit Card Payment and
Paycheck in the pull-down--in the account making the payments. The Loan
Payment designates an account that is the target of the payment. Again, this
is like Transfer.

The Loan Payment transaction automagically calculates--in a split
transaction--the interest expense component of the payment--which it expenses
as you told it to when you setup the loan account as noted above--and the
balance of the total PI payment is a Principal Transfer to the liability
account. Cash comes out of an asset (the total payment, from checking, say)
and goes to an expense and a liability. The interest is an expense--make you
poorer--and the transfer just reduces the balance of an asset and a liability
by the exact same amount.

My recommendation is ALWAYS to get the basic accounts and transactions setup
to work correctly before doing anything to setup the electronic phoo phoo
which just confuses things. That way you can separate and distinguish what is
necessary to get the basic accounting right from what is necessary to get the
electronic phoo phoo right.

 

[Ron Carr]

Thank you.
I will check it out tomorrow.
I do have a degree in Accounting, if unused since 1971. I know what I want
but it less than intuitive how to get it!
Ron

 

[Dick Watson]

The ongoing balkanization of the product to appeal to an ever lower common
denominator user (aka dumbing down) surely doesn't help. My suspicion is
that with M97 or M99 you would have had this all working first time, no
sweat.

 

[Ron Carr]

I have found the problem, sort of: my payments were all recorded as
Principle: Home Mortage. I can correct that by selecting a Category of Loan
Payment: Home Mortgage. What I still don't know is why it got set that way: I
have deleted my automatic Bill Pay entry, but when I enter another there is
no option to select anything other than the Home Mortgage account. That
account is set up with Loan Terms, but did not cause the generation of the
correct split. So I am still a little at sea...
Ron

 

[Dick Watson]

Principle : Home Mortgage sounds like an Expense Category and Subcategory.
Yes, that will do nothing to help reduce the balance of a Loan Account.

You say "there is no option to select anything other than the Home Mortgage
account". Are you saying when you tired to create a Loan Payment, the only
"subcategory" or target of the Loan Payment offered was the Home Mortgage
account? If that is the only Loan Account you have, this would make some
sense. It only offers to allow a Loan Payment in association with a Loan
Account. If you had ten of those accounts defined in Money, it would have
offered all ten possibilities.

You say that the Loan Payment : Home Mortgage [the name of your Money Loan
Account] "did not cause the generation of the correct split". Do you mean
when you actually entered a Loan Payment transaction into the register? And
that entry in the register did not show two elements, one a Principal
Transfer : Home Mortgage and the other an interest expense amount? Or do you
mean that the amounts in these two didn't match the lender's statement
amounts for interest and principal for that payment?

 

[harrelsonesq]

This may or not be your problem, but a few years ago, I went to all the
trouble of entering all my mortgage information. Then, the next time the
payment downloaded, I chose the Expense category "Loan Payment:Mortgage,"
instead of scrolling all the way down to the Special categories, where I
would have found "Loan Payment:My Mortgage." The latter contained the split
information; the former did not.

I could NOT figure out why my mortgage payment split wouldn't "stick." This
is only one of several traps for the unwary within Money. I avoided being
fooled by the Expense category "Credit Card Payment," but "Loan Payment" got
me.

The really fun thing about the Special category "Loan Payment: My Mortgage"
is that it's sandwiched between the (in my case, multiple) "Credit Card:[X
brand card]" entries and the "Transfer:[X brand card] entries, and is
accordingly very easy to miss.

(Your "Loan Payment:[X Loan Account]"category is not necessarily called
"Loan Payment:My Mortgage." It depends what you called it when you set it
up. Just look in the Special categories, and try the one you find there.)

HTH,

Susan