Confused on categorizing loan payments

Hi folks, newbie here. I’m confused how I should be categorizing things like loan and mortgage payments?

Let’s say I have a mortgage loan with $100k balance. Every month there’s a -$1,000 payment out of my checking account to the mortgage. Do I categorize that as a “transfer”? An expense? Something else?

To further complicate things: what if my mortgage is with a small, unsupported credit union, so there’s no matching +$1,000 transaction on that mortgage account? I have to manually update the mortgage account balance every month, which is fine. But again I’m confused how to categorize those checking account transactions every month?

Same question for car loans, etc.

Hope that makes sense. Thanks so much!

I would say it depends on how accurate you want to be. For example in reality the $1000 mortgage payment should be broken up as principal ( transfer) and interest ( expense). While this is really accurate, This is a bit of a pain. So I just have my mortgage as an expense item and assign the payment to that category. Given that your bank isn’t connected to tiller this may be easiest path forward.

An alternate way is to split the transaction into principal and interest and then assign to each category ( mortgage interest and account transfer) However since this amount changes monthly you will have to manually adjust the amount each month.

I would ( and do) go with the easy way.

This might help. B

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@mmurdock, it also depends on whether you want the mortgage payment to be a part of your budget (if you’re using Tiller Money to keep and track a budget). If you use a Transfer category type that won’t show up on your budget and calculate into your planned or actual cash flow. If you use an expense type it will.

Most of the time we recommend that it’s an expense type for the simplest workflow so it’s included in your budget and the money is set aside. In this case, it doesn’t matter that the other side of the transaction doesn’t show if your mortgage account isn’t automated.


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@heather Got it. Thanks! That makes sense. Is there a way to factor end-of-year bonuses into my income budget? I get ~30% of my income in December so budget apps always think I’m overspending month-to-month since we plan on that bonus income for our mortgage, etc.

@heather you stated

In this case, it doesn’t matter that the other side of the transaction doesn’t show if your mortgage account isn’t automated.

So what if the other side is automated? In my case, I see a ($1,000) transaction leaving my account, and a $1,000 transaction credited to my mortgage balance. The way I set up my sheet, this ends up zeroing out in my budget, which isn’t really what I want. I’m trying to track the actual amount of liquid assets leaving my accounts.

@aholmes0 - I do not use the budget tools but based on what @heather says above, it appears you will need to code the 1,000 in the mortgage account as a transfer. Blake

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@aholmes0 - yes, @Blake is right, you’d want to categorize the inflow to the mortgage account as a Transfer or you could use an income type category that is marked as “hide” on the Categories sheet in the “Hide from reports” column there if you want your transfers to always net to $0.

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Great, thank you. Using a transfer category seems to work well.

I am only seeing the gross payment amount coming over from the mortgage account I have connected. Shouldn’t Yodlee or whatever you’re using be pulling the principle, interest, and escrow payments from that mortgage?

:wave: @scottspamkiller !

Generally, Yodlee pulls the transaction as it appears at the institution site so if you look at the mortgage account’s transactions list does it pull those items individually or does it just show the one total payment?

You’ll probably need to just manually split that transaction into multiple parts to represent the more granular breakdown.

What I do is have a budget item called “Debt Payoff Received” and I have that as hidden, so I don’t see it in reports. I use that rather than “Transfer” because should I want to actually see those transactions, I can see my payments rather than transfers.
I then have a category in my budget with the name of the loan, and when I pay my loan, I use that category.
This way, I can use the Debt Planner sheet more efficiently and cleanly see the names, budgets and actuals.

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2 posts were split to a new topic: Data quality changes with some bank feeds