Categorizing mortgage repayments as an expense (with the interest portion as a transfer)
How a mortgage is set up and tracked in PocketSmith can vary from user to user! Check out the options below to get your mortgage set up in PocketSmith in a way that best suits you 🏠⚡️
In this user guide
Overview
This method is great for
Fixed Mortgages
Floating mortgages
Offset mortgages
Revolving credit mortgages
Redraw facility mortgages
Note
If you are tracking your mortgage in your PocketSmith, we also recommend adding your house as an asset to make your net worth more accurate. Adding an asset to Net Worth
Categorizing mortgage repayments as an expense (with the interest portion as a transfer)
Reasons to set up a mortgage in this way
This option is best if you want to see your principal mortgage repayments as an expense in PocketSmith reports and budgets, but also want accurate net worth forecasting that takes into account the reduction in your loan balance as well as the interest charges.
Category set up
In order to manage your mortgage within PocketSmith in this way, you'll need to create three unique categories, for example:
- Mortgage Repayments Outgoing (regular category)
- Mortgage Transfer (transfer category)
- Mortgage Interest (transfer category)
Note
If you have more than one mortgage account, you will need to create two categories for each of your mortgage accounts. For example;
- Home loan 1 Mortgage Repayments Outgoing (regular category)
- Home Loan 1 Mortgage Transfer (transfer category)
- Home Loan 1 Mortgage Interest (transfer category)
- Home loan 2 Mortgage Repayments Outgoing (regular category)
- Home Loan 2 Mortgage Transfer (transfer category)
- Home Loan 2 Mortgage Interest (transfer category)
You'll need to assign each side of the Mortgage repayment to a separate category.
- Assign the debit transaction to the Mortgage repayments outgoing category
- Assign the credit to the mortgage account to the Mortgage transfer category
- Assign the interest transactions that are debited from your mortgage account to the Mortgage interest category
- Ensure that both the Mortgage transfer and Mortgage Interest categories are set up as transfer categories.
Note
If you have your mortgage with ASB, your repayments will be split into two transactions for each side of the transfer - The interest portion and the principal portion.
You will need to categorise both the expense interest and principal transactions leaving your main account to your Mortgage Repayments Outgoing category and both the income interest and principal transactions entering your mortgage account to your Mortgage Transfer category.
Budget set up
In order for accurate forecasting of your net worth, you'll need to set up the following Budgets.
- Mortgage Repayments Outgoing - Expense budget
- Mortgage Transfer - Income budget
- Mortgage Interest - Expense budget
Create an expense budget for your Mortgage repayments outgoing category.
This will allow you to track your expense payments in your overall budgeted figures and this will also be reflected in your account forecast.
Create an income budget for your Mortage transfer category.
As this is a transfer category, the credit to your Mortgage account won't be counted as income, but the budget will account for the credit arriving in the account, providing accurate forecasting for your loan balance.
In order for your interest payments to be reflected in your forecast, you'll also need to create an expense budget for your Mortgage Interest category.
Because this is a transfer category, the budget ensures that the interest is not counted as an expense, but allows for accurate forecasting for your loan balance.
For details on how to create a new budget, please see: Creating a new budget
Creating filters
With this method, PocketSmith's additional automatic transfer marking may mark the expense repayment transactions as a transfer. To help prevent this, we do recommend setting up a filter to categorise your mortgage repayments and unmark these transactions from being a transfer. This way, any of these future transactions won't get marked as a transfer.
Setting up a filter will overwrite the automatic transfer marking and make sure that these transactions aren't being marked as transfers and will show as an expense and appear in reports ✨
You can find steps to creating Filters here: Creating a filter.
To set up this filter, you will need to search for your expense mortgage repayments, then you will be able to choose what actions you'd like to be applied by the Filter - in this case, Assign category is Mortgage Repayments and Tick Mark as not transfer from the drop-down, as shown in the screenshot.
You will also want to tick 'Apply filter to X matching transactions' to ensure that the existing and future transactions will not be marked as a transfer.
You may also need to set up a similar filter to categorise the income side of the mortgage repayment going into your mortgage account and have this Filter mark these transactions as a transfer.
Note
If you have an offset or revolving credit mortgage account, for any transfer transactions going into or out of this mortgage account that are separate from your regular and scheduled repayments, you will need to assign these transactions to their own transfer category - you could call this Additional Mortgage Transfer
For any income and expense transactions going into or out of this mortgage account separate from your regular scheduled repayments and interest charged payments, you will need to assign these transactions to a relevant income or expense category.
How this will affect your PocketSmith reports
Categorizing and budgeting your mortgage repayments and interest charges in this way will mean that your principal mortgage repayment will show as an expense in PocketSmith reporting and will also be included in your overall budgeted figures.
The credit to your mortgage account and the deduction of any interest will allow for accurate forecasting for your mortgage account.
