It would be great if there was a facility to deal with offset mortgages.
Currently I have both 'savings' and 'current' accounts linked against my mortage, but those types of accounts are already grouped independently in pocketsmith. (ie I have a current account group for budgets of day to day spending, and a savings group for planning savings across all savings accounts).
However, the balances from the accounts linked to my mortgage all contribute together towards saving interest against my mortgage, and consequently, it is hard to demonstrate that all in PocketSmith.
I currently have a calendar for the mortgage, and a calendar for the 'credit linked to the mortgage' which I use to calculate interest savings. I have to manually tot up the accounts linked to the mortage each month and put that in the 'credit linked to mortgage' calendar
Clearly that is very clunky, so a simple 'this is a linked account' box for each linked account would mean that interest calculations are very easy to do.
Given that at the moment, in the UK at least, interest rates are so low, the best place to put savings is an offset account, as the interest savings are not taxed.
Being able to see how that interest is accrued would be very useful.
Our team have discussed how to support offset mortgages but it seems like these are treated differently by different banks. Some have just 1 account with different balances, while others have multiple accounts. This makes it hard to develop this improvement.
It would be great if you can provide examples of how your offset mortgages are laid out by your bank, including how they deal with different accounts, balances and transactions. These extra details will help us with developing this feature.
Quentin Jackson commented
I bank with BNZ. I have a mortgage and an “Offset / Revolving Credit” facility they call total money. You can create (online) up to 50 accounts, of which any positive balance contained within, is counted toward decreasing the amount in the offset / revolving credit account.
I have to say it’s an amazing facility, but either way, would be great to have a way to work with this in PocketSmith. I’m new to PocketSmith and so I don’t quite understand why it just can’t call them all one account or similar for forecasting purposes. It’s not like the transactions are special. I’m still hunting for some kind of credit / loan / mortgage account flag that I would have thought solved all this.
I'm looking for a finance tool that handles this simple (and common) function (just reduce the principal of the loan by the balance of the linked offset account(s) before calculating interest each period). Otherwise there's no point to projecting my finances if my offset account doesn't reduce my premiums. You should implement it ><;
Rafe Pulley commented
A simple solution for me would be to redirect the positive interest from the offset account toe the mortgage account
Rafe Pulley commented
I bank with ANZ. We have a mortgage account with a linked offset account. The balance of the offset account offsets the interest in the mortgage account.
I bank with ME Bank in Australia. I have an offset account and a loan account. The interest from the offset account is subtracted from the loan interest for that month.
When the interest is charged it shows like this:
15/01/2016 OFFSET Benefit of $22.01
15/01/2016 LOAN INTEREST $someamountofmoney
All of the offset accounts we have consist of a separate loan account and a separate offset account.
This includes Bank Of Melbourne, AMP & NAB.
Loan account is like any other loan account.
Offset account is a transactional bank account that is nominated as an offset to the loan account.
Interest is calculated daily and charged monthly to the loan account.
Interest is calculated by subtracting the offset account balance from the loan account balance then applying the daily interest rate to the reduced balance.
Eg. $400k loan & $100k offset interest is calculated on $300k loan.
Sam Barker commented
I have a revolving credit facility with Kiwibank in NZ; which means that the account effectively acts like a giant overdraft (which is actually how the bank account for it). I use this account for all day to day banking. My salary is credited to the account, and all bills are debited from it. Kiwibank display the account as having a
- overdraft limit of +$X
- available balance of +$Y
- current balance of - $Z
Interest is charged on the last day of the month, calculated daily and charged on the current balance.
Hi Jayson, My bank (ANZ) provides a mortgage account and an offset account. Both the mortgage and offset interest is calculated daily and applied on the mortgage payment date along with an automatic transfer as the mortgage payment. The mortgage interest is entered as a debit on the mortgage account, but the offset interest savings are not recorded as a transaction anywhere.
I think this would be the simplest scenario to deal with as there's no fixed/variable split, or multiple holding accounts or proportions to calculate. Also, the mortgage anniversary/payment date will need to be selectable, as the interest calculation is not made on the last day of the calendar month, which is how the current PocketSmith interest calculations are done.
Chris Cunningham commented
This feature would be amazing. I cant find any finance tool out their that does this for a home user. Being new to revolving credit mortgages we are struggling to work out what we have and what we don't hence why we were looking for a tool to help. Countless hours trying to get excel to work.
Sam Barker commented
The bit about revolving credit that is hard to deal with in poket smith is the fact the account is affectively an overdraft against the house. So I would like to be able to include the net debt figure in the mortgage (at its own interest rate), however for day to day banking purposes I prefer to see the cash balance of the account.
e.g. A revolving credit account of 100,000 @ 5% with a cash balance of 40,000.
Should be treated as a debit of 60,000 for the mortgage.
And for the day to day usage as a balance of 40,000.
Would love this feature. I initially tried to manage my mortgage manually so I could keep the interest figures correct but it became too much hassle and I ended up just deleting the home asset and mortgage account.
Yes, I have the same scenario as Richard - several mortgages, each with their own offset account. I was planning to handle this manually as a temporary fix as hopefully I won't have spare cash laying around for too long!
I've decided not to use calendars much as I would really like to be able to budget multiple transactions within the same sub-category and I can't.. but agree that one should be able to link accounts together to offset each other's interest.
I also believe that the "interest" you can set on a mortgage account should carry over into the Income and expense report (it doesn't) - as I was advised by Jayson that you either "budget" for interest or use the "calculate" interest on the manage individual accounts (from which you can then create scenarios).
Agree with this. Cash flow planning to minimise interest payments is key. By setting budgets for income and expenditure we should be able to predict offset account balance and consequently interest reduction on mortgage payments