Most rental property mortgages are serviced by fixed monthly payments that include amounts for one or more of the following:​

If your loan is amortizing, the amount of principal and interest paid will vary every month. Some mortgages also include escrow contributions in their monthly payments. These contributions are held by the lender to cover large expenses such as property mortgage insurance (PMI), property taxes, insurance, and HOA dues. These escrow payment amounts may be adjusted annually, but generally do not change throughout the year.

If you have connected Stessa to both your bank account and to your mortgage provider, for every payment between you and your lender you might get two transactions on your ledger. For example, when you pay your monthly mortgage bill, you’ll see a money out transaction of funds leaving your bank account and you’ll also see a money in transaction reported by the lender of them receiving those funds. Since we don’t want to count this exchange of funds twice, you’ll want to split the money out transaction from your bank into the relevant parts (principal, interest, and escrow if applicable) and categorize the money in transaction as a general transfer.

The key point is that monthly payments into escrow accounts are not actual expenses. As opposed to the other monthly costs (principal and interest), they are merely cash transfers and should be categorized as negative figures under one of the escrow transfer categories. Stessa will update the escrow balance on your balance sheet to reflect this money being added to your escrow account. Note, that all of the escrow transfer categories will be lumped into a general escrow payments line on the report. These transactions will not show up on your net cash flow reports as they are not actually expenses.

If you have expenses that are covered by escrow, say your property taxes, these will be paid in one of two ways.

Your lender may pay these expenses directly on your behalf. In this instance, you'll record the actual expense amount that your lender paid in the correct expense category (PMI, Insurance, Property Taxes, etc.) This will ensure that the cost is noted correctly as an expense on your net cash flow and other reports. However, you also want to track that the expense is coming out of your escrow account and therefore, decreasing the escrow balance on the balance sheet report. To do this, you’ll select the ‘paid from escrow’ checkbox when editing the transaction.

Alternatively, your lender might disburse the escrow money back to you so that you can directly pay these bills. In this case, you’ll want to track the money coming back into your bank account as a positive, or money in, transaction that is in one of the escrow transfer categories. Stessa will then deduct that amount from your escrow balance. You’ll then go on to pay the bill, say with a transaction to your county for your property taxes. This transaction should be categorized as normal under one of the expense categories. Do not mark the transfer as ‘paid from escrow’ since you are paying the bill from your bank account. This last transaction will then show up on your net cash flow as an expense while not deducting from your escrow balance since that deduction occurred during the transfer transaction.