How to handle all in one mortgage products with a line of credit facility that are common in Europe, Canada, Australia & NZ etc.

How to handle all in one mortgage products with a line of credit facility that are common in Europe, Canada, Australia & NZ etc.

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  • Can you describe what happens in the real world? What are the real accounts? How does money move between them? Are any allowed to go negative?

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    • dakinemaui I use the Overdraft 'workaround' as follows.  

      1) Checking account that matches the real world account.

      2) Checking account that reflects the account limit.

      I actually set the the Limit account balance at roughly $5000 higher than the actual balance of real world account (rather than the actual bank account limit) so I only budget with that much extra debt.

      3) Other Liability account that mirrors the 'limit' account. The asset and debt figures are artificialy inflated on the Accounts screen. This can be corrected in Reports by not selecting the dummy accounts.

      4) Budget category of Reduce Limit that reduces the Limit account balance by say $1000 each month. When I'm confident the real balance will stay under my target ceiling, I move money from the Limit account to the Mortgage account. 

      I don't think the method can be improved under the current YNAB account structure. And I don't see that changing any time soon, or ever, as it goes against the 'only budget for money you have' rule.

      What would he helpful for non-US customers, would be to have the workaround described in YNAB support documentation where it can be easily found, instead of buried in overdraft forum threads.

      Reply Like 1
    • Slate Blue Koala Thank you for sharing your thoughts here! I'm going to pass along a request for more documentation on this topic! :)

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  • There is only ONE account.

    Basically it is an interest only mortgage with no required capital repayment. Interest is calculated and charged monthly.

    It functions as a 'check' account. You can 'draw down' or deposit as you want.

    It can go negative up to the agreed limit at normal interest rate. It is also often possible to go over the limit, in which case a higher interest rate is charged until it goes back under the limit.

    Basically it will be negative at ALL times until it is paid down to zero or closed.

    I hope this is clear😁

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      • dakinemaui
      • dakinemaui
      • 11 days ago
      • 1
      • Reported - view

      Slate Blue Koala Sounds like a normal UK overdraft account then. The process should work fine.

      However, your #4 statement above indicates you don't understand how the Limit Account is supposed to function. There are no transfers involving that account.

      If your understanding is based on the process outlined by Support, you may wish to read a description that I made. It's the same process, but I believe more tutorial in nature. See this:

      https://support.youneedabudget.com/t/q5wlp8

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    • dakinemaui 

      dakinemaui said:
      However, your #4 statement above indicates you don't understand how the Limit Account is supposed to function. There are no transfers involving that account.

       With respect, that's a little patronising. I do understand.

      I view this a refinement. I realise it is fudging the figures, but for me it adds discipline and reduces the temptation to spend the banks money.

      My intent is to bake in a limit to the "available amount" and budget with that in mind. Not treat the difference between the balance and limit as all available less what will become a massive Overdraft Reserve budget figure down the track.

      So I budget an amount each month that equals what would he the Principal part of a normal P+I mortgage and apply (hopefully) the month befores payment to reduce the Limit.

      To do this I have to send money in the budget category somewhere.

      Basically it is like reducing your credit card limit to force you to never overspend.

      So while the account limit is say $200,000 and the account balance is $100,000, I want to budget within a virtual limit of around $5,000 while putting $5,000 into the Reduce Limit category monthly.

      Moving money in the Reduce Limit budget category from the mythical Limit checking account to the mythical Mortgage liability account makes it look more like the Outstanding Balance of a traditional Principal plus Interest mortgage where you can redraw money you have paid above the minimum monthly mortgage payment, but no more.

      To me seeing the Limit falling better reflects the reduction of the debt.

      PS please stop saying overdraft, it is a mortgage or line of credit, that makes me feel like you don't understand the difference between cookies, biscuits, muffins, English muffins and scones 😁

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      • dakinemaui
      • dakinemaui
      • 10 days ago
      • Reported - view

      It's fine to inject less than the maximum amount possible into the budget if you want. I don't personally see the difference if it's sequestered in the Reserve category (what you're calling "Reduce Limit") or you just use a smaller number in the auxiliary account (I won't call it an "Overdraft Limit" 😉), but the amount within the remainder of your budget is identical. So I have no issues there.

      I get that you want to reduce the debt by a normal P&I payment. All you have to do is budget this amount to the Reserve category each month. That's it. You're DONE. That action ensures that money is NOWHERE else in your budget.

      I gather that you are trying to see exactly how much of "their money" is in your spending categories. This is exactly what the Goal on the Reserve category already tells you. Every time you budget the P&I amount to the category, that Goal shows you closer and closer to 100% "payoff" and the Inspector (on the right) gives you the amount left to go.

      I don't disagree that you can make fake payments (transfers) to a mythical Tracking account (the "mortgage liability") if you like. In my view, it's redundant and requires more work. However, it's also not my budget. 😄

      In any event, I'm glad you have a workable system. Cheers!

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