How to enter a refinance in REI Hub
For many real estate investors, refinancing investment homes is a normal part of the process. Refinancing can help you take advantage of better interest rates for a lower monthly payment, or to pull cash out after the property has risen in value. This guide outlines how to make and enter a journal entry based on the closing statement from your recent refinance.
To enter in a refinance journal entry:
1) Add a Loan account for the new loan
2) Open a manual journal entry
3) Enter in the base details
Enter the closing date and appropriate property. Add a description of your choosing, such as 'Property Sale Journal.'
4) Add the debit lines
- The old loan account and the amount of loan payoff. This should zero out the loan account.
- Your bank account receiving funds and the amount of those funds. Owner Funds could be used alternatively if you are not tracking funds into your bank account.
- If your refinance did not include a 'cash-out' component, you will omit this line.
- Capitalized closing costs, summed together. These include title fees and insurance, surveys, recording fees, legal fee, and transfer taxes.
- Expenses incurred in the financing process. These will be entered with the specific expense account (eg Insurance) and the amount, which will flow through to your Schedule E/ PnL and be deducted against income in the same year. These costs can include property taxes, property insurance, HOA assessments, and prepaid mortgage interest.
- Initial escrow account contribution.
- If your new loan is not escrowed, you will omit this line.
5) Add the credit line:
- The new loan account and it's full amount.
6) Save the journal entry
Optionally add a file or image of the closing statement, and save the transaction.