In addition to standard residential mortgages, the REI Hub system can help you track interest-only loans and lines of credit (such as home equity lines of credit or HELOCs).
These non-mortgage loans differ slightly from standard monthly mortgages because each payment typically has no principal paydown or escrow contribution.
The loan payment template automation is built on the presumption of a standard residential mortgage but doesn't handle less common situations like interest-only mortgages, loans that compound daily, or multi-property loans.
Creating the Loan Account
1) Create a new loan
Click +Add Loan from the Loans page and complete the basic details.
Uncheck the button to set up the loan payment template.
With the loan payment template enabled, selecting the Loan Payment transaction type while booking transactions will always attempt to break the payment down between principal and interest, which is incorrect for interest-only loans or lines of credit. Additionally, they are not typically considered mortgages and do not typically include escrow.
2) Book payments for interest-only loans and lines of credit
Interest-only payments
The first option (and the easiest one) is to book interest-only payments using the 'Expense' transaction template. While standard residential mortgage payments would not be handled this way (principal paydown and escrow transfer are not expenses), payments that are 100% interest can be handled this way. This route also has the advantage of automation available with transaction matching rules, which can be set to auto-book expenses based on the description or the specific transaction amount.
Second, you can select the 'Loan Payment' transaction template, from which you select the specific loan account for which the payment is made. Absent the payment template, it won't automate the principal/interest split but will instead present blank fields for principal and interest, which you would fill out with zeroes for principal and escrow and the total to interest. This transaction can't be automatically booked since we're not using the payment template.
Principal-only payments
Principal-only payments can be booked using the 'Transfer Between Accounts' transaction type, selecting the bank account as the 'Transferred From' account and the loan as the 'Transferred To' account.
Alternatively, you can select the 'Loan Payment' transaction template, from which you select the specific loan account for which the payment is made. Absent the payment template, it won't automate the principal/interest split but will instead present blank fields for principal and interest, which you would fill out with zeroes for interest and escrow and the total to the principal.
Payments inclusive of principal and interest
Payments that include principal and interest should be booked using the 'Loan Payment' transaction type. Select the appropriate loan account, click Continue, and you can enter the principal/interest split.
3) Set the loan balance
Setting a balance for an interest-only loan is not a requirement if you only want to track income and expenses, but it is necessary if you want to be able to see the loan on your balance sheet.
First, make sure the loan account has been created as described above. A balance can't be set before the account exists.
If you received the loan funds into a linked bank account in REI Hub, you can book that deposit transaction as a 'Transfer Between Accounts,' selecting the appropriate loan account as the 'Transferred From' account. This will update the balance of both the loan account and your bank account. If you received the loan funds in a personal account not linked to REI Hub, you can debit the Owner Funds account instead of the bank account.
You can also set the initial balance with a manual journal if preferred. You will debit the bank account receiving funds (or Owner Funds if the funds went to a personal account not linked in REI Hub) and credit the loan account.
Still have questions? Reach out to our Support Team via email at [email protected] or call us at (888)939-6865.