How to track a mortgage or car loan that doesn't connect

A loan that cannot be connected is the easiest kind of account to track by hand, because its balance changes by a known amount on a known day. Track it as a manual debt at its remaining principal, and update the figure once a month from the statement, or from the amortization schedule, which states exactly how much of each payment reduced the balance. The payment itself needs no manual entry: it leaves the checking account that pays it, arrives categorized as a bill, and shows in the budget like any other. A $298,000 mortgage and a $13,400 car loan stay current with one number a month each, and the number is on the statement.

Why loans are easy to track by hand

A checking balance is the sum of daily activity nobody can predict. A loan balance moves once a month, by the principal portion of a fixed payment, and the lender publishes the schedule in advance. Between statements, the balance is exactly what the schedule says it is, to the cent, unless an extra payment was made, and an extra payment is one more known number. The manual update is a minute a month, and it is never stale by more than one payment.

Track the balance from the statement

1. Create a manual account for the loan, on the debt side, named for the lender and the loan.
2. Set its balance to the remaining principal on the latest statement, not the payoff quote, which adds accrued interest and fees to a date.
3. Update it each month when the statement arrives, or on the payment date from the amortization schedule.
4. Adjust for extra payments by subtracting them the day they post, since an extra payment goes entirely to principal.
5. Check the balance against the statement at least quarterly, so a rate change on an adjustable loan or a misapplied payment is caught.

Read the amortization schedule

Every fixed loan has one, and most lenders show it online or on request. It lists each payment's split between interest and principal, and the balance after each. For the car loan in the example, $13,400 at 7% with a $320 payment:

The interest is the balance times the monthly rate, and the principal is the payment minus the interest, so the balance after each payment is known before the payment is made. The manual account's balance on the payment date is the schedule's figure for that month; see How paying off debt raises your net worth even when savings don't move for what the principal column does to net worth.

A mortgage with escrow

A mortgage payment that includes escrow for property tax and insurance has three parts, and only one of them reduces the balance. A $2,150 payment might be $1,180 of interest, $470 of principal, and $500 of escrow; the loan balance falls by $470, the escrow account rises by $500 until the tax bill is paid from it, and the interest is gone. The manual loan account is updated by the $470. The escrow balance can be tracked as a small manual asset or left out, since it is spent on the household's behalf within the year.

A worked year, two loans

Twelve updates for each loan, each a number from a document, and the loans' lines in net worth are exact on every payment date. The June extra payment is the only figure that was not on the schedule, and it is subtracted on the day it posted.

The payment side needs nothing manual

The payment leaves the connected checking account on its date, arrives as a transaction, and is identified as a recurring bill by its pattern; it is counted in the budget in the month it is due, like the rent. Nothing about the manual loan account changes that. What the manual account adds is the balance, which the checking transaction cannot show, and the two together are the complete picture: the payment in the budget, the balance in net worth.

Common mistakes

• Recording the payoff quote instead of the principal. The payoff adds accrued interest to a date and is not the balance.
• Recording the whole payment as principal. Most of an early mortgage payment is interest and escrow.
• Entering the payments as transactions in the manual account. They are already in checking; the manual account holds only the balance.
• Forgetting extra payments. They reduce the balance in full and are not on the schedule.
• Never checking against the statement. A rate change or a misapplied payment shows up there and nowhere else.
• Leaving the loan off because it is manual. Net worth then omits the household's largest liability.

Common questions

How do I track a mortgage that won't connect? As a manual debt at the remaining principal from the statement, updated each month from the statement or the amortization schedule, with extra payments subtracted the day they post. The payment itself is a bill from checking and needs no manual entry.

What balance should I enter, the payoff amount or the principal? The remaining principal. The payoff amount is the principal plus interest accrued to a specific date and any fees, and it overstates what is owed on the statement date.

Do I add the escrow to the loan? No. Escrow is money the lender holds to pay taxes and insurance on your behalf, and it is not part of the loan balance. Track it as a small manual asset if you want it on the sheet, or leave it off.

How do I handle an adjustable-rate loan? The same way, from the statement, with the check against the statement done monthly rather than quarterly, since the schedule changes when the rate does.

Can I just let the app's net worth skip the loan? You can, and net worth is then wrong by the loan's balance, which for a mortgage is usually the largest number on the sheet. A minute a month keeps it right.

How Zypper handles this

Zypper connects loans, including mortgages, auto loans, student loans, and personal loans, wherever the lender supports a connection, and they contribute their balances to the liability side of net worth; a loan that cannot be connected is a manual account, added from the accounts page with a name and a balance you set to the remaining principal, updated whenever the real value changes, and counting toward net worth alongside the connected accounts. The payment from your connected checking account is identified as a recurring bill from the pattern of your transactions, with its next expected date and amount on the recurring page, and it counts in the budget in the month it is due. See Supported account types, Manual accounts, and Recurring transactions and bill tracking for the details, or get started with Zypper to keep the loan on the sheet with one number a month.