If you want to track a mortgage for a property in Buildium, there are a few different steps to ensure it is entered properly so you can record any financial transactions associated with it.
Use this article if you:
Are responsible for paying the mortgage
Want to track the amortization of the loan
In this article, you'll learn how to:
- Record only the mortgage expense
- Add a mortgage, including amortization and escrow.
- Make a mortgage payment
- Record a payment made from escrow by the mortgage company
Use this solution if you:
- Are responsible for paying the mortgage
- Do not need or want to track the amortization of the loan
To add a mortgage:
- Add an expense account called Mortgage Expense to your Chart of Accounts.
Record a check to the mortgage company each month. Use the Mortgage Expense account when you write the check.
If the mortgage amount doesn't change each month, use the recurring check feature.
For more detail on the loan's progress, work directly with the mortgage service company. For example, the mortgage company can help you track escrow, interest paid, insurance payments, etc.
A mortgage is typically considered a long term liability account.
Add the property that was purchased by the loan as a fixed asset account.
Add escrow that is held by the mortgage company as a current asset account.
Make sure to uncheck Cash asset.
Add mortgage interest as an expense account.
Add specific expenses that may be paid directly by the mortgage company from escrow as expense accounts
For example - fire insurance, homeowner's insurance, etc.
If you have multiple mortgages to track, consider naming the liability account after the bank. Mortgage. #1234 with Anywhere Bank is much easier to decipher than a generic mortgage.
Similarly, consider naming the fixed assets after the buildings. One Main Street and 15 Any Avenue are more descriptive than building.
Record the initial loan with a general journal entry.
Credit the mortgage's liability account.
Debit the property's fixed asset.
If you've already made some payments, balance the general journal entry using Opening Balance Equity as the offsetting account.
For example, let's say the mortgage is for a property valued at $100,000 and the remaining principal balance is $80,000. The general journal entry for this mortgage would be.
DEBIT: Property Fixed Asset - $100,000
CREDIT: Loan - $80,000
CREDIT: Opening Balance Equity - $20,000
Making mortgage payments is easy.
- Record a check using the bank as the payee. When you write the check, apply the money to the appropriate accounts such as mortgage liability, interest expense, escrow, etc.
The mortgage liability account is the loan's principal.
(Optional) To record a payment made from escrow by the mortgage company, use a general journal entry.
For example, let's say there was $10,000 in escrow. The mortgage company used $5,000 to pay property taxes. The general journal entry for this escrow payment would be:
DEBIT: Property tax expense - $5,000
CREDIT: Escrow current asset - $5,000