I'm setting up a 25 year, interest-only mortgage in Quicken 2004 Deluxe. It's asking me the "Compounding Period" (and the only options are "Daily", "Monthly" & "Semi-Annually"). What would the appropriate answer be for a loan of this type?
Note: I called my mortgage company (twice) and they acted as if they had never been asked this question before (the first person said "Daily", the second person said "Monthly").
Do NOT set the loan up in Quicken using the mortgage wizard. The wizard expects the pertinent loan to be amortizing ... which yours isn't.
Instead, set up the following:
1) A liability account for the principal of the mortgage 2) An Expense account for the interest that you pay 3) A memorized transaction for your constant monthly payment with the category being the expense account in step 2.The compounding period is only relevant on amortizing loans so that Q can calculate the split in each payment between interest and principal (which you won't be paying).
db
1) what benefit do you get from "tieing" them together? NONE. They'll both show up on your "Net Worth" report whether they're tied together or not. 2) It's something you owe. That makes it another Liability account. For the interest on the 2nd, you can either set up a 2nd Interest expense account, OR you can use classes on BOTH interest payments to distinguish between the loans -- which you'll definately want to do a tax time.
db
As far as I know, Quicken is capable of calculating a correct loan payment schedule for interest only loans ... based on the same assumptions as Quicken's ability to calculate a correct loan payment schedule for loans that include principal and interest. That is: Quicken should get most loans calculated correctly, but may not be able to handle all.
In Quicken, an interest only loan is a loan with a balloon payment of 100% of the principal of the loan due at the end of the loan. If you know the correct amount of your loan payment and you enter that with the rest of the loan info - and Quicken would otherwise have been able to calculate a correct loan payment schedule - I think the Quicken Loan Wizard can corectly handle your interest only loan.
On the other hand, it is not clear to me that there is an advantage to using the Quicken Loan Wizard for an interest only loan, since the advantage of the Loan Wizard is that it can calculate the principal/interest splits for every payment for the life of the loan ... and there is no split for an interest only loan.
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