Registering Loans & Mortgages: Amortization & Suffixes

Property acquisition is capital-intensive, and most rental portfolios are financed through bank mortgages. Tracking loan balances, principal paydowns, escrow reserves, and deductible interest requires precise sub-ledger configurations.

This document walks through registering a loan, setting up its sub-GL suffix codes, and generating its amortization schedule.

Why Mogul Books Uses Loan Suffixes

To isolate individual loan balances on your Balance Sheet, Mogul Books uses a sub-GL suffix system. When you register a loan, you assign it a short suffix code (e.g., WFB for Wells Fargo, or CHASE for Chase).

Mogul Books uses this suffix to create isolated sub-accounts under standard parent codes:

2400.WFB — Mortgages Payable - Wells Fargo
2600.WFB — Accrued Interest - Wells Fargo

This keeps your lenders' balances isolated, allowing your CPA to verify loan balances against annual 1098 forms easily.

Step 1: Registering a Loan & Mortgage

To set up a loan in Mogul Books:

1. Navigate to the Setup Console and select the Loans & Mortgages tab.

2. Click + Register Loan.

3. Input the lender details and loan terms:

Lender Name: Name of the bank (e.g., "Wells Fargo").
Sub-GL Suffix: A 3-to-6 character code (e.g., "WFB"). Must be unique.
Original Principal: Initial loan amount (e.g., $300,000.00).
Interest Rate: Annual rate (e.g., 6.5%).
Amortization Term: Term in months (e.g., 360 for a 30-year loan).
Start Date: The date of your first scheduled payment.
Monthly Escrow: The initial amount of your payment allocated to property tax and insurance reserves (e.g., $500.00).

Step 2: Generating the Amortization Schedule

Once saved, Mogul Books' ledger engine computes the complete mathematical amortization schedule.

For every month of the loan's life, Mogul Books calculates:

Total Payment: Fixed monthly payment (calculated via standard financial formula).
Interest Portion: Calculated as:

Interest = Remaining Balance times frac{Annual Interest Rate}{12}

Principal Portion: Total payment minus the interest portion.
Ending Balance: Remaining loan principal.

You can view this schedule row-by-row on the loan details page to verify how your equity is growing.

Step 3: Configuring Interest Accruals & Payment Splits

Mogul Books supports two modes for posting interest accruals:

1. Automatic Accrual (Recommended)

On the accrual day of each month, Mogul Books' background task posts a journal entry recognizing interest expense:

Dr 5080 - Mortgage Interest — $1,400.00
Cr 2600.WFB - Accrued Interest - Wells Fargo — $1,400.00

When the cash payment clears, the transaction is matched to the Wells Fargo loan. Mogul Books reviews the schedule, pulls the current month's line, and generates the split:

Dr 2600.WFB - Accrued Interest (clears the payable liability) — $1,400.00
Dr 2400.WFB - Mortgages Payable (reduces principal balance) — $600.00
Dr 1310.WFB - Escrow Reserves - Wells Fargo (prepaid tax/insurance asset) — $500.00
Cr 1110 - Operating Cash (cash outflow from checking) — $2,500.00

2. Manual Accrual

If your lender's interest rate adjusts or you make prepayments, you can trigger interest accruals manually in the Loans Manager. You input the exact interest billed on your monthly statement, and Mogul Books handles the ledger entry.

Escrow Reserves and Ledger Suffixing

Lenders collect escrow deposits alongside mortgage principal and interest to cover property taxes and hazard insurance premiums. To maintain clean audits, Mogul Books automatically sets up a sub-GL asset account for escrow reserves:

1. Sub-GL Account Creation: When you register a loan with suffix WFB, Mogul Books automatically sets up 1310.WFB (Escrow Reserves - Wells Fargo).

2. Deposit Recognition: When mortgage payments are split, the escrow portion is debited to 1310.WFB, growing your prepaid asset balance.

3. Bill Settlements: When the lender pays your county tax or hazard insurance from the escrow account, you record:

Dr 5040 - Property Tax (or 5050 - Insurance)
Cr 1310.WFB - Escrow Reserves

4. Loan-Level Integration: By referencing 1310.WFB, every escrow inflow and outflow is linked directly to the matching loan (loan_id), giving you a real-time reconciliation of your lender-held reserve account.