Bookkeeping for Loan Refinance

My client, Sophia, has recently obtained mortgage refinancing for two of her properties and has asked AccuraBooks (her current bookkeeping service provider) to make these entries into the bookkeeping platform.

In particular, Sophia was able to close out (pay off) the old loan and obtain a much higher loan as part of the terms for the refinanced loan. The result of the higher loan means Sophia was able to obtain direct cash (member draw) from the refinanced loan proceeds because the value of the actual loan needed for the property was much lower.

So, Sophia will be left to pay a higher mortgage payment each month to pay off the refinanced mortgage amount, in hopes that the property will retain its value if/when Sophia should decide to sell someday.

For the bookkeeping, I obtained the final loan history statement from the old mortgaged loan and the closing disclosure/closing costs detail statements from the new refinanced loan matter.

The loan history statement from the old mortgage gave me the exact information regarding the date of the payoff, the final interest paid, the final escrow balance and the amount of the escrow refund.

The closing disclosure/costs detail statements from the new mortgage gave me the exact information regarding the new loan amount, the loan costs and the cash that was paid out to Sophia.

To accomplish my bookkeeping entries to reflect all of this, I simply had to make a journal entry (for each property) to book the following:


  • Debit to the current loan to close this out.
  • Debit to the mortgage interest expense and escrow accounts to reflect the final payment made to the old mortgagee (this is tied in with the actual payoff of the loan).
  • Credit to the new mortgaged loan (to create this new liability).
  • Debit to the new loan closing costs.
  • Debit to member draws to reflect the cash proceeds paid to Sophia.


Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.


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