Using a Home Equity Line of Credit/Budget Categorization
I have a problem I'm trying to figure out. We have a home equity line of credit that we recently had to access for the first time for a large unexpected home repair that we were unable to pay for entirely out of savings.
So, I entered the HELOC into YNAB as a Line of Credit type account and gave it an opening balance of the 30K I accessed to complete the repairs. I then wrote a check to the contractor for that amount. Now here's the question: how should I categorize/account for the repair in my budget?
If I categorize it as home repair, then it show's that I've overspent in that category using credit by 30K which is correct, that's what I did. But then say I get paid and get 5K that I can throw at the HELOC. On my budget, it came in as an inflow to be budgeted, and if I record the payment transaction, it appears as a transfer to the line of credit. So to keep it accurate on the budget end, would I then budget the 5K payment under the house repairs budget account instead of as a debt payment? Thanks in advance for any help as I think I've thoroughly confused myself here!
No, I don't think so. You paid $30k for the house repair, and you transferred the money back to your HELOC. So that money has been used as dent replacement, not as house repair, because you would have to take it off your HELOC again if you wanted that $5k for more house repair.
If you're trying to get your category to not be overspent, you acknowledge that it was debt by taking the available to pay money in the Credit Card category and moving the money to your house repair category. Then it reflects that you are NOT paying $30k to repay the HELOC this month. Then put your TBB straight to your HELOC category, since that's what you're planning on repaying this month, and the transfer will come out perfectly.
Hi Violet Deer !
If you added that account as a line of credit, it should appear under your Credit Card Payments category. When you plan to make a payment, budget the funds towards that category. If you named the account HELOC, then there will be an HELOC category.
When you receive the 5K, categorize it as Inflow: To Be Budgeted. The funds will then appear in To Be Budgeted and you can budget it towards the HELOC category. Then, enter a transfer from Checking to the HELOC account - YNAB will recognize this as a payment and update the Available amount accordingly. :)
HI! I'm chiming in because I did something similar with a HELOC, but I have a follow-up question: I still don't quite get what happens to the overspent category of Home Repair that the original post asked about. As she did, I categorized the checks I wrote to the contractor as Home Repair. So how do I deal with that overspent category? Should we budget anything into the Home Repair category? That doesn't quite seem to make sense to me. Sorry - just trying to wrap my brain around this.