I goofed setting up a Home Equity Account

You need 2 accounts/categories specifically for the home loan: 1) a LIABILITY account for the principal of the loan and 2) an EXPENSE account for the interest.

The beginning balance on the LIABILITY account will be he first monies that you received FROM the account (and deposited into a bank account, perhaps?). After that, each payment should be split with the principal payment (used to reduce the outstanding amount due) being made to the LIABILITY account, and the interest made to the EXPENSE category. This to amounts would, normally, be made from within a single split transaction.

db

Do you need an EXPENSE account, or just a category? If you do need an account, what is the account used for?

You need BOTH, as I explained in my previous message: The LIABILITY account to track the amount owed on the loan, and The EXPENSE category (there's no such thing, in Quicken, as an expense account), to track the interest paid.

db

I just realized the my original reply in this thread referred to an expense account.

While that's the proper term in accounting lingo, Q refers to Income and Expense lines as being categories.

I created the "Liability" account in the Property & Debt Center The part I'm still having problem with is: When I open the Split window My first line is Interest Paid, which should actually increase my total indebtedness. The second line is Principal, which should actually now DECREASE indebtedness as I always include extra monies toward the principal.

But the two amounts are added together into one category and just decrease the total of money still owned by the total sum of my payment.

In other words, the Interest Charge should be a Positive number and the payment to principal should be a Negative number in the computation For example interest Paid....373.68 payment to principal....626.32 Split total is $1000.00

but the Balance should NOT decrease by $1000.00 it should only decrease by 626.32

My brain is old...I can't seem to get a handle on this.

I think I could do it by not using the 'Split'. Simply put in to line items for every payment. One would be for the interest charged in the INCREASE column the other be for the payment to principal in the DECREASE column but it sure seems like a one line entry with the Split Feature should do that automatically.

The problem appears to be that you are trying to enter the split payment transaction in the loan liability account; where I think that split payment transaction should be entered in the account you are paying FROM. The total of the payment should reduce the balance of the FROM account; one split line should increase the amount of interest paid, and the other split line should be a transfer to the loan liability account ... which will reduce the amount owed there.

No. Interest paid does not change your total indebtedness (i.e. principal owed).

No, they should not be added into one category.

Enter with expense category--e.g. Int exp. Interest paid will not change the amount (i.e. principal) owed.

Enter as transfer to the liability account. This will change (lower) amount owed.

Tom

Why not set this up as a *Loan*, and create an appropriate linked account to handle the *Principle* payment? Which allows you to transfer additional Principle and Escrow payments to the appropriate accounts.

Why should it be considered a *charge*? Is it added, monthly, to your Principle balance? I could be wrong and have been many times, but this interest should not even be considered when talking about lowering the Principal. On a first mortgage you borrow X amount, that is what you are reducing with the amount credited to the Principle. The Interest amount, which goes to the *Lender*, never comes in contact with the Principle amount of the loan. Consider the Interest amount as the Lenders monthly payment for lending you the original amount, and if tax deductible should be assigned to a Category that has the appropriate Tax Line Item assigned to that Category.

Use Quickens Loan feature to set this up.

That's it, you win the brass ring. I was trying to enter the two amounts in a split in the loan account. Once I corrected it to the checking account I pay the loan from...it worked as I expected.

Thank you.