Tracking mortgages using a Liability 🏡

How a mortgage is set up and tracked in PocketSmith can vary from user to user! Check out how to manage your mortgage using a liability below 🏠⚡️

Overview

After gaining feedback from our users 🗣, we've learned that there are different ways in which people like to set up and track their mortgage in PocketSmith.

The simplest method is to track your mortgage account as a balance-only account and only track the mortgage payments coming out of your main account.

However, we know that method isn’t an option when the bank your mortgage is with doesn’t have a feed connection available, or you’re not using our feeds feature.

In this case, you can track your mortgage in PocketSmith using a liability instead. Liabilities and assets in PocketSmith are different from regular bank accounts in that they don't contain transactions. In place of transactions, you can use budgets to track your budgeted payments when paying down debt, reduce the amount owing on that liability, and use the Calendar page to make any balance adjustments.

Adding a liability

The first step when managing your mortgage as a liability is to create the liability in your PocketSmith account. You can do this by heading to the Net Worth page (Reports > Net Worth) and selecting  Add Liability from the toolbar

Creating categories

Once you have added your mortgage as a liability, you can start creating the categories you will need to manage your mortgage as a liability 🎉

The categories you will need per mortgage are:

• Mortgage Repayments (expense category)
• Mortgage Repayments Credits (transfer category)

These categories should look like the below within PocketSmith:

You will categorize your outgoing mortgage repayment transaction to your Mortgage Repayments category. If you have multiple mortgages, you will categorize each outgoing mortgage payment to its corresponding Mortgage Repayments category.

There will be no transactions assigned to your Mortgage Repayments Category as this category is used to create a transfer budget to automatically reduce the balance of your liability. There will be more detail on this further down the guide.

Setting budgets

Once you have created the categories you need, you can now set budgets on these categories 🎉

Expense budget for the main account:

You will need to create a repeating expense budget on your Mortgage Repayments category reflecting the amount and frequency of your mortgage repayment.

For example, if your full mortgage repayment for one loan is $2500/month and you pay this on the 1st of every month - you would create a monthly repeating expense budget for -$2500:

Income budget for liability:

The income transfer budget on your Mortgage Repayments Credit category is what will automatically reduce the balance of this liability, showing that you're paying off this loan! 🎉

Liabilities and Assets are different from other accounts in PocketSmith in that they don't contain any transactions, and instead use transfer budgets or a manual approach to keep their balance up-to-date.

When creating the transfer budget f​or a liability on your Mortgage Repayment Credits transfer category, the budgeted amount should be set to the principal portion amount of your loan. For this, you can take your full repayment amount less any interest - this will be your principal amount.

Under 'Which account's forecast is this budget for?'. This will ensure this transfer budget automatically reduces the balance of the liability for the budgeted amount, each budget period.

Under 'This is a transfer from', leave this blank with no account selected.

Making adjustments

As you pay down your loan, the portion of your repayments that are for principal and interest will change. This means you will need to update the budget amount for your Mortgage Repayment Credits transfer budget. We recommend doing this every 3 to 6 months for better accuracy.

If you find you need to make balance adjustments to your liability so the balance of your loan as a liability matches the balance you see in your internet banking, you can make these balance adjustments on the Calendar page: Updating the value of an asset or liability from the Calendar page