Got a mortgage payment? Yeah, who doesn't. And chances are, if you have a mortgage payment you also have to deal with escrow payments. Escrow is the bank's way of making sure you take good care of their property until you pay off your mortgage and turn it into your own property. Your mortgage lender collects additional funds each month in an escrow account. When taxes and/or insurance are due, the bank uses escrow to pay them.

It's a little more complicated than that because things like taxes and insurance aren't easily predicted. The sum of your escrow payments probably won't balance with the tax and insurance bills at the end of the year. GnuCash does an exceptional job of keeping track of exactly what's going on with your mortgage and your escrow account. Here's how to handle escrow payments in GnuCash.

Your regular mortgage payment Each mortgage payment gets broken down into its component parts in the GnuCash checking account register. Specifically, there are these line items:

• a debit to checking for the entier mortgage payment amount
• a credit to the mortgage interest account
• a credit for principal to the mortgage account
• a credit to the mortgage escrow account

The three credits balance out the debit - the transaction balances.

Paying taxes When it's time to pay taxes, the money they're paid with comes out of your GnuCash escrow account. That transaction looks like this:

• a debit escrow for the amount of your taxes due
• a credit to your GnuCash expenses account for property taxes

That's all there is to it. There are only two things which can complicate this further.

1. you may have one or more other transactions paid out of escrow for insurance. GnuCash handles these escrow payments the same way it handles the tax payment outlined above
2. Your bank may overestimate your taxes and insurance and collect too much from you. If this should happen and if your bank sends you a check for the overage, all you have to do is enter it into your GnuCash escrow account as an Overage Refund Payment, crediting your checking account and debiting your GnuCash escrow account for the amount of your check.

Handling escrow payments in GnuCash is fairly straightforward once you've made a few payments. The beauty of GnuCash is the transparency it brings to the flow of money in your personal finances.