Mortgage payable definition
/What is a Mortgage Payable?
A mortgage payable is the liability of a property owner to pay a loan that is secured by the property. From the perspective of the borrower, the remaining principal balance on the mortgage that is not to be paid off within the next 12 months is classified as a long-term liability. Most of a mortgage is classified in this manner, since most mortgages have terms of up to 30 years, and so will not be paid off for an extended period of time.
Any portion of the debt that is payable within the next 12 months is classified as a short-term liability. This separate treatment is needed for liquidity analysis purposes, to see if the mortgage holder has sufficient current assets to pay for all current liabilities.
Related AccountingTools Course
FAQs
What is the Effect of Refinancing on a Mortgage Payable?
Refinancing a mortgage payable involves replacing the existing loan with a new one, often to secure a lower interest rate or better terms. The original mortgage payable is removed from the books and replaced with a new liability reflecting the refinanced amount. Any refinancing costs or fees may be capitalized or expensed, depending on their nature.
Related Articles
Accounting for a Non-Interest-Bearing Note