Loan Refinance

[SheilahH]

We recently refinanced our mortgage due to a balloon payment coming up. There were no fees associated with the refinance since we stayed with the same lender, however, at the date of signing the paperwork, there was accrued interest added to the loan balance.

I currently track our principal balance in a liability account and interest expense in an expense account. Do I need to pay-off the liability account and start with the new balance? If so, how do I go about that? If not, what do I do so that my liability account will once again be correct?

Using Version 11.1

Thanks.
Sheilah

[JohnDMeyers]

I take it that no large amounts of cash where sent back-and-forth, between you and the bank.

If what you did was change to a different kind of loan, where the liability has increased by a lump sum of interest, and perhaps your payments are going to be different from here on out, then what you are facing is a way to add interest to your liability with no other change. (i.e. no addition nor subtraction from your checking account).

If that assumption is correct, then I would look at it as a non-cash expense. In other words, you incurred an expense, but no cash left your account.

What I would do is create a new account near your mortgage interest expense account, called Refinance Expense (non-cash) and make this entry:

CR 01-2180-000 mortgage liability $2,000 *
DB 01-5840-000 Refinance Expense (non-cash) $2,000

* this would be your existing mortgage liability account.

[SheilahH]

Thank you so much. That is exactly what I needed.

Sheilah

[excitedd]

I'm guessing that this should have been a new question instead of a reply.
We did not incur any new charges at all. But note and interest rate was reduced.
I'm using a new fund on a different computer than before the refi.
What are the journal debit and credit entries to start the new notes payable?