Revolving credit

[aboylikedave]

There was a recent interesting thread about revolving credit.

My question is not when and for what and how to use it but the specific of knowing what should be in it at a given time. My revolving credit is $20,000 and whilst it is a good facility I also want to ensure that it is paid back in the same term as the main mortgage.

I can pay back a monthly amount as if it was a table loan, but if I keep savings etc in there I also want to know how much should be in there and how much I have available to spend.

Can I ask how anyone does this, or do you think this is not the way to use them. If I had lots of spare cash during and at the end of the mortgage period I can see this is not such an important question as you could be safe in the knowledge that whatever interest you had paid was less than without the revolving credit. But I operate to quite a tight budget and it seems to me I need to know whether I am 'up' or 'down' on the deal at any one time . I guess I am trying to see it as a 'table mortgage with flexibility' - is this wrong?

In short - how do you keep track of it?

Any advice or comments?

[Keithw]

I dont see any point in trying to keep track of the Notional amount of savings that you should have in there.
It's all Your money, so wherever you can save money in one area by moving it from another, you are minimisng your total costs.

You are doing the right thing putting all your incoming & savings into the RC, as it makes no sense to have borrowings in one account costing 7% while you have savings in another earning 2%

The best way to determine if you are ahead or behind is not to just look at your cash position, but to do a spreadsheet of income against costs but also include the "Value" of your properties & current amount of loans, ie a balance sheet in accounting terms

[PC]

When I was paying off personal debt I got the bank to reduce the available balance by $250 each month.
Works like a principal repayment.
I think 20K was the limit on how low the LOC could be reduced to though.

[BusyLizzy]

I don't try to 'keep' track as such - but I throw ALL spare money into the revolving credit account, so that every dollar I have is 'working' for me. A majority of my expenses are paid for my credit card, and that is paid off in full each month. My salary goes straight into the revolving credit as well so it has the maximum amount possible sitting in it.

If you are concerned, just set up a simple spreadsheet, with rows for each month, and columns for Money In, Money Out, Savings, and 'Surplus'. Fill out the Savings column with whatever amount you wish to retain as savings and you can keep a running tally of this column to know what is your true savings. The 'Surplus' amount is anything you have left over at the end of the month that is putting you 'ahead' - if that makes sense?!

Revolving credit accounts are great IF you are disciplined. I'm more a natural saver than spender, so it works for me. Because I'm a spreadsheet geek, I have a spreadsheet to track expected cashflow each month, and that helps keep me on track, especially for my plans for big expenditure items (eg travel).

[lissie]

The best way to determine if you are ahead or behind is not to just look at your cash position, but to do a spreadsheet of income against costs but also include the "Value" of your properties & current amount of loans, ie a balance sheet in accounting terms

Exactly - you just left the days of having a simple answer to "what is my net worth" far behind! I asked the same question when I started investing - to find my net worth takes me about 1/2 day of spreadsheets and lots of guesses about current values!

[One]

I update a spreadsheet monthly with the balance of each mortgage and the RC. I sum up the changes in each account to see how much less in debt we are at the end of each month.

Before I set this up, the RC made my head spin.

We use the RC like BizzyLizzy does: all salary and other income goes into it, most spending is on credit card and that gets paid in full each month out of it.

[mortgage broker]

Some banks will allow you to have a reducing revolving limit, if it was a case of trying have more discipline yourself you could take a shorter term on the revolving. Every client is unique in how much they should have as a limit. I have tried to explain a method of picking here but usually advice each client based on their individual needs.

http://www.mortgagesonline.co.nz/mortgages/fixed-term.php