Today’s post is being brought to you by guest blogger Mario of Houston USDA Loans
Those of you who hire someone to provide bookkeeping services or who do it yourselves may have questions on one of your largest expenses: your mortgage and/or loan. Whether you buy or rent for business purposes, logging it all correctly can be difficult, but I’ll show you how below.
1. Should I Record My Mortgage and Home Loan Each Month?
In short: yes. Any expense associated with your business should be part of your 
monthly bookkeeping. This includes the principal, interest, and any mortgage insurance, such as PMI, FHA, USDA, or VA. Why should you keep these separate? It’s not only good bookkeeping, it is also useful when it comes to tax time and you need the numbers fast.
2. How Should I Report a Mortgage Loan Payable?
A mortgage is basically a loan that is associated with your business for those of you who are purchasing your business property (not renting). Any number listed as “mortgage loan payable” should refer to the principal only. For example, if you borrowed $200,000 over 30 years to purchase the property and are making a payment in principal of $3,000 per month, you will claim a total of $36,000 as mortgage loan payable per year, each year.
3. How Should I Report a Mortgage Interest Payable?
Using the same figures as above, if you pay $3,000 per month in principal and another $1,000 in interest, the second figure is classified as “mortgage interest payable,” and the total that will be claimed for the year is $12,000. Future interest should not be recorded, given that refinance rates often fluctuate and are likely to do so in your favor during the life of the loan.
4. How Should I Report a Mortgage Long Term Liability?
Now that you have properly classified your mortgage and the interest, it’s time to classify the remainder of the loan, also known as the long term liability. Again using the above numbers and assuming this is the first year you are bookkeeping with them, you would perform this simple calculation:
Total loan – Principal paid in current or all years = Long term liability OR
$200,000 – $36,000 = $164,000
The process would then repeat for each year for the next 29 years or until the loan is paid off. Given that interest can really add up, I highly recommend this.
5. How Should I Report a Mortgage Asset?
Now that you’re paying off your mortgage and putting in principal, you must also list this is an asset. Again using the previous figures, when you first take out $200,000 loan, your assets in this regard are $0. However, each principal payment you make becomes part of your assets. So after one year of $3,000 per month principal payments, your mortgage and/or property assets are $36,000 and will continue to grow as you make payments.
6. Does Long Term Liability Apply to Any Business Loan?
In short, yes. The amount of loan you borrow for any reason for your business is considered a liability and shrinks as you make payments. So too does the interest as shown above. However, the amount of the asset may not necessarily be worth the principal, depending on the loan. For example, if you are buying a car to use for your business that costs $20,000, your asset is worth what the car is worth according to a recognized agency, such as the Kelly Blue Book.
7. How Should I Calculate Mortgage Taxes?
The real estate taxes you pay on the property should also be recorded each month, even if they are paid through a bank or escrow account. This number is a crucial part of your balance sheet, as well as deduction when it comes time to file your federal taxes.
7. How Should I Calculate Rent?
If you are renting your business space, you still mark it every month as part of your bookkeeping. However, since there is no mortgage, interest, asset, or long term liability associated with the loan (past the current lease), rent is simply rent.
Mortgages and Home Loans in Houston
To learn more about mortgages and other home loans in Texas, Call Mario at (832)277-5060 or send an email to get more information.
Bookkeeping Services in Houston
And if you are in need of expert bookkeeping services in Houston or the surrounding area, please contact me.
