Problem with tracking Loans and Mortgages RRS feed

  • Question

  • I’m so satisfied that I I’ve found this useful forum about Microsoft money. I’ve been working this wonderful software since 2007 which is a great financial tool for me and my small business company. I had a contact with Microsoft Hellas (Greece) but unfortunately they couldn’t help me as they answered me that my problem is a software bug which will be solved in the next months. (…??????). It is well known that money will be without support after the 31<sup>st</sup> January.

    I have a problem in the set up of tracking loans and mortgages .When I create a loan with all the data required e.g. the loan interest, the amount of monthly payment etc. money makes a strange input of data. The total monthly payment is actually an expense. However when I recall a report (income and expense) the total amount of payment is in the Income section while clicking at it, the transaction remains as income minus the interest which is in the right place, in the category of expense as a ‘’business rate expense’’. What goes wrong with it? The philosophy for a debt of a loan is that the borrowed person pays a total amount which is split for the decrease of the principal and the interest for the bank. It is well understood that the total borrowed money has been spent for any need at the beginning whatever the loan.

    Why the principal counts as an income in ms money?

    Thank you in advance.


    Thursday, January 20, 2011 10:32 AM

All replies

  • I'm not sure what you are seeing, but let me tell you what I know/see on mine.

    I have a Loan Account. Call it "My Loan Account". I borrowed money--if you loaned money, invert everything upcoming. The Loan Payments I enter in my Cash Account (checking, actually) to pay that loan automagically split into two components. The first component is a "Principal Transfer : My Loan Account". It is a debit to the cash account reducing the money asset value in my checking account. It is a credit to the Loan Account liability reducing it as well. The second component is an expense against the category I defined the Loan Account/Loan Payments to use for interest costs when I setup the loan. It is also a debit to the cash account. It's money that's spent, gone.

    The components of the Loan Payment show up in two places in my default Monthly Income and Expenses report. The first is the Expense of the interest cost. The second is the Transfer of the ("Principal Transfer") which shows up in the Transfers section. I'm seeing this as a negative amount against the Loan Account in that section. At first I didn't understand this. Without I think about it a lot longer, here's what I think is going on: The accounts shown in the Transfers section are Investment or Loan. From that point of view, this Principal Transfer is a transfer OUT of the accounts the report is covering to accounts it is not covering. In a wierd sense, this makes it like an Expense to the collection of accounts the report is covering. If it's a hangup--agree it seems an odd way to report this--there are some settings in Customize to change how Transfers are handles and one of them is "Don't Include transfers". The default is "Include transfers to or from asset or liability accounts." If you set "Don't include transfers" the report doesn't look as goofy.

    Thursday, January 20, 2011 12:44 PM
  • Thanks for your fast and detailed response. I'll try it as soon as possible and I hope that your method will work.I'll be back.Thank you a lot Dick.

    Thursday, January 20, 2011 1:33 PM
  • From the beginning it looked a little bit complicated as I’m not as experienced in ms money as Dick and many others here, but finally it worked well. As Dick says I created a loan account not choosing the detailed level. After that the payments from cash or saving accounts are split into two separate transactions which correctly reduce the total loan amount borrowed. Reports show clearly the principal and the interest as expense and the correct balance.Can you explain me the set up of the principal transfer?Is it a subcategory? when I write it, money warns me that is already chosen by the programme. 

    The difference is that when you set up a detailed loan you have the analysis of the descending interest and principal exactly the same as the bank report or statement. In this way that Dick explains above, I think that you have to put all the transactions manually according to the bank sheet. I got a loan which started 5 years ago which consequently my first payment is in the past. Is there a recurring option which shows in detail the older transactions? Thank you again.


    Saturday, January 22, 2011 12:57 PM
  • "Principal Transfer" is just like "Transfer" and "Credit Card Payment"--it's how the app denotes money moving from one account to another. When you setup a loan/scheduled "Loan Payment", it's implicit. You don't need to define it. If you go through the detailed setup, just tell it there is some category for interest expenses, and let it create the scheduled payment, Money will do the rest. You can even setup the scheduled "Loan Payment" to be entered into the registers sutomatically.

    You don't necessarily have to put in any transaction splits manually; for loans with simple interest amortization, Money should track pretty closely to the bank in computing interest expenses, thus principal balance reductions. You may choose to update the Money calculated interest amounts in the transactions using the real amounts from the bank's statements. Just edit the transactions in the register like you'd edit any other transactions.

    For loans that started months or years before you set them up in Money you have several options and considerations. First, the wizard will ask if payments have been made then if you want to record them all or just the ones for this year. Then it will ask you when the first payment was made.

    If you've told it to record payments just for this year, it's not going to allow the first payment date to be before this year unless you roll the computer's date back--and of course it then won't record the payments to the real present day. It's also going to expect you tell it the balance from the previous year ending statement not what you borrowed originally.

    In either case, it will compute out and enter the payments from that original loan amount or previous year ending balance. It enters these historic payment without the "Principal Transfer" account being specified since that would presumably throw off that account's balance. But it does note them.

    You can always adjust a Loan Account balance by entering a transaction by hand in the Loan Account register that increases or decreases the balance to match a recent statement balance. If Money's amoritization differs slightly from the bank, this will get them back in sync.

    You can always create a new data file or open the sample file and play around if you want to know how setting up an account certain ways will be treated by Money.

    Saturday, January 22, 2011 2:27 PM
  • Thank you for your fast and detailed response. All this procedure that you describe for the set up of a loan is something that I have done many times with different ways to solve my problem as I told you in a previous post. The only thing that I can’t control is that in the monthly income and expenses report the monthly payment is placed as unassigned income and below I have an expense which is defined in the detailed loan set up, the suggested Business loan interest. What goes wrong with it? Why do I have an income in a payment which seems the principal as income, and the interest as expense?Thanks.
    Sunday, January 23, 2011 1:44 PM
  • I do not see any unassigned income in the report; all I see is the Transfer component in the transfer section and the expense component in the Expense section. As noted, the Transfer component seems a little silly but customizing the Transfer section out of the report solves that.

    Are you using the Business version? I haven't used/tested it.

    I'm also wondering, exactly, what your Loan Payment transactions look like. In both the account making the payment and in the liability account receiving the Transfer component.

    I'm also wondering if you've tried Restting customization on the report.

    Beyond that, I'm out of ideas.

    Sunday, January 23, 2011 3:07 PM
  • This is the about Microsoft Money Plus Home & Business Version and I've been working in the business not the personal section.Is it possible to send you screenshots through one note or a pm or an e-mail with an attachment?

    Sunday, January 23, 2011 4:03 PM
  • I'm using M+H&B and my loans all show properly in the Expenses section (interest and transfers) so I'm guessing that you set the loan up as a recurring transfer, rather than as a recurring bill.
    Sunday, January 23, 2011 4:21 PM
  • How can I understand the difference?I set up the loan step by step and it seems so easy!!!In the bill summary the loan can be editable but in the transfers doesn't exist.I think that the solution is in my previous post.
    Sunday, January 23, 2011 4:40 PM
  • Dick i was trying to find the ''Restting customization'' on the report. In which label can i find it?Thanks.
    Sunday, January 23, 2011 6:37 PM
  • Sorry bernvac, if you used the loan tool, you're right - it should be correct (assuming the transfer is to an Liability account with a negative balance).  I thought perhaps you set the bill up manually.  You are decreasing the negative amount each month, right?
    Sunday, January 23, 2011 7:18 PM
  • Finally I thought i was so idiot!!!!Thanks a lot for your reply.The point is how can I set up a loan now?What do you suggest me to do?Thanks ameridan and Dick and everyone, I'm so interested in increasing my knowledge in this great financial tool even without microsoft umbrella!!
    Sunday, January 23, 2011 7:32 PM
  • Do you think that there is a theory that the programme itself counts the principal as the total amount borrowed ???????Is this this the reason that interest is the only expense?where does the capital (the total borrowed money) belong to?Is it counted as an asset divided in many parts according to the specified loan life?

    Monday, January 24, 2011 6:35 PM
  • I'm not sure which questions are still outstanding.

    The principal is the amount borrowed and the balance of the Loan Account at inception. This is a liability. The Loan Payment Principal Transfer component goees from an Asset (say Checking) to this liability. The interest component is the Expense in a Loan Payment.

    As discussed in one of these threads or the other recently, Money does not directly represent what happens to the proceeds of the loan. Typically I advise people to go include it in whatever transaction is using the money as "Other Income : Loan Proceeds Received" so similar with a Memo pointing to the Loan Account the money came from. There are other ways. This is mine. As an example, say you buy a car for $25,000 and borrow $23,000 to do so, you might have a transaction like this (ignoring fees and taxes, trade-ins, payoff of loan on trade-in, and 100s of other complications):

    Automobile:Payments                           $25,000
    Other Income:Loan Proceeds Received  ($23,000)
    Total of Transaction:                             $2,000

    The expense here was the $25k to buy the car. The cashflow was the $2k out of pocket. The Loan Account setup created a $23k liability. The $23k here is where that $23k went.


    Tuesday, January 25, 2011 2:38 AM
  • Hi everyone that likes money but I'm still confused about the use of loans and morgages. After many hours of practice I finally found a way to solve the problem that I had. The first line of the split with multiple transaction was unassigned and when I defined ''transfer from cash'' everything went well.Moreover when it was time to track a new regular payment, the transaction differed in the report area in the transfers view.In the previews months in the transfers area the total amount of the loan payment appears as gross but now when i track it manually only the principal appears and the interest is in the ''interest expense'' category which seems correct.Is there a possibility to send an image or copy to be more detailed in social microsoft forum?

    Thanks in advance.


    Monday, March 14, 2011 1:37 PM
  • Hi everyone that likes money but I'm still confused about the use of loans and morgages. After many hours of practice I finally found a way to solve the problem that I had. The first line of the split with multiple transaction was unassigned and when I defined ''transfer from cash'' everything went well.Moreover when it was time to track a new regular payment, the transaction differed in the report area in the transfers view.In the previews months in the transfers area the total amount of the loan payment appears as gross but now when i track it manually only the principal appears and the interest is in the ''interest expense'' category which seems correct.Is there a possibility to send an image or copy to be more detailed in social microsoft forum?

    Thanks in advance.


    I'm still looking forward for someone to help me but not any response yet. I’m wondering if it would be better to cancel the set up and tracking the loans using them as an ordinary expense but since I own 4 loans and 1 mortgage  I believe that is more accurate to track them using a loan account watching the gradually increase and decrease of capital and interest and all the other advantages. I tried to find a solution using the very useful book for money from dummies written by Paul Weverka but in this case it didn't help me. I also tried to set up a loan with many ways but I don't know what goes wrong with it. There are some experienced people here who helped me a lot but I think that sending an ms money attachment to someone It would probably solve my loan confusion.

    Thanks one more in advance. 


    Thursday, March 17, 2011 1:47 PM
  • Hello to everyone I'm happy that this forum is still active for all of us who are using Microsoft money.

    A year ago I tried to set up my loans but after many attempts without finding the right way I decided to set up the loans as  regular expenses.

    In the loan transactions I use a bank to transfer the cash to pay the loan and this look as a ''transfer category''. I split the loan as an interest+principal manually. The problem is that the transfers aren't included in the expense reports even if the transfers are selected in custom option. In some reports the transfers are shown (bar chart option) below the axe and they look differently compared with other expenses. Does anybody use a loan as an expense instead of the preferable account type e.g(long term loan)?

    Friday, February 17, 2012 10:55 AM
  • Transfers are just never going to show up as Expenses. That's how Money is designed.

    You can readily skip creating the Loan Acocunt or any variant thereof and just call the money flow for the payment some Expense Category, just like, say, you treat your mobile phone bill. The ONLY downside to this (outside of formal accounitng tradition for treating liabilities the way Money does) is that Money will not have an "account" to reflect the loan account balance and amortization. Excel is frequently a useful companion tool to Money.

    Friday, February 17, 2012 1:52 PM

  • Thank you Dick for your fast reply. By that I understand  your experience leads me to use my loans as expenses not as accounts. Is it possible to change my loans accounts using the ‘’find and replace option’’ instead of changing all the transactions one by one manually?

    I have been using   money since 2006 only to track my small business account without including anything that has to do with home. I use money plus Home and business version it the right version to use as I live in Greece ?

    Thanks in advance,

    • Edited by bernvac Tuesday, February 21, 2012 9:32 AM
    Tuesday, February 21, 2012 9:30 AM