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I keep seeing TV adds about the Manulife One account.

Does anyone have any experience or advise about this product? It just sounds like switching a conventional mortgage to a secure line of credit.
 

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I keep seeing TV adds about the Manulife One account.

Does anyone have any experience or advise about this product? It just sounds like switching a conventional mortgage to a secure line of credit.
Thanks Jon for linking to my blog post.

Couple of problems with Manulife One:

1. You have to be disciplined. For many people, a gigantic line of credit will be a big temptation to draw it down for consumer expenses.

2. Monthly fee.

3. You can get a cheaper mortgage rate elsewhere compared to Manulife One.
 

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Don't forget Crappy Tire offers the same all in one plan too:
https://www.mortgageinyourway.com

Funny, I don't see anywhere if you can pay your mortgage installment with Canadian Tire money.

CC: May be a good piece to revisit your CT article considering no Prime-% VRM exist anymore, and the CT product is in line with this.
http://www.canadiancapitalist.com/canadian-tire-one-and-only-account/

My VRM is due next year and according ot CT, I can save 20K in interest and shave 10 years off my mortgage. Now this is of course my mortgage payment is unnaturally low due to the low prime currently, so the future would be different if rates rose.
 

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according ot CT, I can save 20K in interest and shave 10 years off my mortgage.
I can understand that the marketing of these types of mortgages/accounts is appealing, but it seems people sometimes fail to realize that a traditional mortgage has as much flexibility to pay down the debt.

Assuming pre-payment priviledges of 20%, anyone could pay off their ENTIRE mortgage in 5 years if they dumped all their cash flow towards the debt. And since traditional mortgages have always had lower rates than the "All-In-One' products, all it takes is some strict discipline and you should be able to achieve the same benefits (lower interest paid, and reduced amortization).
 

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Assuming pre-payment priviledges of 20%, anyone could pay off their ENTIRE mortgage in 5 years if they dumped all their cash flow towards the debt.
Well, anyone within reason. You have to have a pretty high income, a small mortgage, or very low living expenses to be able to pull that off. ;-)

In fact, though, this is the kind of approach we took with our mortgage, which is through ING Direct. We took out a 15 year accelerated mortgage with twice-monthly payments, and each year we put in extra payments. We haven't gotten anywhere close to paying 20% yet in a year (that would be about $59K), but over the past two years we've managed to pay 22% of our mortgage. So we're already down to 10 years instead of 15, and with a bit more discipline we could probably get it down to 8 years or fewer.
 

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I bought my first house last spring and got married to my fiances a few months later. I spent a lot of time looking at mortgages including Manulife One. In the end I got pre-approved from PC Financial (always has a vary competitive variable rate similar to ING). THen went to a mortgage broker and said "I can get this at a grocery store. I expect you to do better." Got 10 basis points off and better terms.

The problem with the MO mortgage is that the savings isn't nearly as much as they make it out to be. It's really just a home equity line of credit combined with a chequing account for a monthly fee.

The interest savings by having your monthly float sit in that account is negligible.

As people mentioned, most mortgages have generous enough prepayment privleages that you are unlikely to be in the position where you've got cash to pay down but you can't because you've used up all your priv's.
 

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I use M1 and have for years. As a product, it is what it claims to be. I do not recomend Manulife Financial based on sour customer service experiences and poor handling of rate increases when they dissociated the M1 rate from prime.

Aside from the merits, for or against, a couple of recent observations:

When we sold our house and bought a new one it was insanely easy. Kept the same account, just filled out a transfer of security form and submitted it.

It is essentially a HELOC and we've got access to a large amount of credit in our M1 account, but it doesn't show on our credit report at all. :eek: Is this normal for HELOCs? I suppose this is a selling point if you want to double-dip on your home equity.

Crunch the numbers, use their calculator, and be HONEST with yourself. It is what they claim it is. Do be aware, the rate has no relation to prime, regardless of what they may tell you (Other banks are following suit and increasing HELOC rates as well). The monthly fee is non-negotiable, but there is a discount if you are an Engineer ($7).

I continue to like that it is "simple". I would certainly go with Canadian Tire (if it were available in SK) or National Bank's product.. I'd like to switch, but laziness always gets the best of me with that it seems (I've got direct deposits, pre-authorized debits, etc all setup there so it would be a hassle).

Also, check books are not free and the ATM network is limited.
 

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http://www2.manulifeone.ca/en/home/

Having Manulife as our group pension manager at work, and being relatively pleased with fees, reporting, and fund quality, I spent some time studying Manulife One and there certainly are conceptual advantages to the idea. But really it is just a big credit wrap.

There is nothing in this that you couldn't do yourself if you wanted. Early mortgage payment discipline, leveraging home equity, accessing lines of credit etc.

For some, it may make them feel more emboldened than they really should be, and it may actually take some of the rigor out of managing the intracacies of your own finances.

I'd approach this one very cautiously and get some independent advice before diving in.

And as one poster previously noted, convenience banking isn't easy with these folks.

But then again, whadoiknow....
 

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I use M1 and have for years. As a product, it is what it claims to be.

It is essentially a HELOC and we've got access to a large amount of credit in our M1 account, but it doesn't show on our credit report at all. :eek: Is this normal for HELOCs? I suppose this is a selling point if you want to double-dip on your home equity.
I have no doubt that all-in-one accounts work. The question is: does it save most people money? I have my doubts since it is possible to get a cheaper mortgage elsewhere and conventional mortgages typically come with generous prepayment privileges.

I don't recall our mortgage showing up on our credit report either. It may be because mortgages are secured. But I don't think it would be possible to double dip. I don't know the exact mechanics but a mortgage on a property would be registered and checks will be made when obtaining another mortgage.
 

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Try using a Mortgage Acceleration Program

For the lowest "effective" rate you are better off with a mortgage acceleration program like SmartEquity (in Canada). As long as you have a positive monthly cashflow and follow the program as directed, you can decrease amortisation by 1/2 or more and save a lot of money. It requires no alteration to your current cashflow. I talk about these types of accounts on my blog, see following threads:
http://financematters08.blogspot.com/2009_06_28_archive.html
http://financematters08.blogspot.com/2009_07_05_archive.html
http://financematters08.blogspot.com/2009/07/presidents-answer-to-my-question-about.html

Disclaimer: I have recently joined Home n Work Mortgages based on my impression of the SmartEquity System. For a tutorial go to the following link and click on SmartEquity Tab. If interested in an live online webinar by the creator of the software let me know, you can ask him questions directly. They run every Tues and Thurs.
http://www.tomvenner.info

The purpose of this post is NOT "to sell" anyone the product. I would like some feedback and analysis of the strength and weaknesses of this approach. I find most people have a hard time wrapping their heads around the concept of turning 25-35 year amortized interest into straight interest a chunk at a time thereby reducing the interest cost and time required to pay down the balance.
 

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After reading your blog posts, it seems to me that the SmartEquity system is just a DIY method of setting up an all-in-one account, similar to the Manulife One, the National Bank all-in-one, or the Canadian Tire all-in-one. Most of these systems involve putting your entire house loan into a HELOC, but some allow a combination of fixed mortgage and a variable-rate LOC. All SmartEquity does is gives you tools for projecting or analyzing what an all-in-one system can do for you. It isn't really required to implement an "Australian mortgage", but could be helpful if it's not too expensive.

I already partly use this method of mortgage accelleration, by applying any savings against the mortgage (keeping track of how much) via increased monthly payments, and then borrowing the same amount back from my HELOC when I need the savings for a vacation or some big purchase. I then decrease the monthly mortgage payments in order to pay back the HELOC. It seems like I'm not really paying down the mortgage faster, but the benefit is that instead of the savings earning me 2 - 3% in a GIC, they are saving me interest equal to my current mortgage rate.
The all-in-one accounts just take this a step further, using the balance of your chequing account (not just savings) to reduce the interest you pay. It's a great way to shorten your mortgage if you're able to make a budget and stick to it (don't spend more than you earn!). I would never pay any kind of monthly fee for this though, so Manulife One is out. If SmartEquity is trying to charge regular fees too, then it's out too. Someone could just go get a Canadian Tire or National Bank mortgage and not pay any fees at all.
 

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Perhaps some people can but few are getting the results because they lack the proper direction. Let's look at some numbers, remember, you are not required to decrease your cashflow by making extra payments or paying more per month.

Take a 250k mortgage at 6% for 30 years. If your monthly income is 5k and expenses (including mortgage) are 4.5k, following the SmartEquity program will pay off your mortgage in 16.4 years and save you $146,130 in interest payments. OK, so you ask what if you only have an extra $100 a month, same situation, you pay it off in 25.5 years and save $51,575. Either way the savings more than compensate for the cost of the software. Sometimes you have to look at the big picture.

Note: this program will not help you if you spend more than you make but will save you a lot of money if you have some fiscal discipline. I encourage you to watch the tutorial and try out the calculator to see how much you can save.
www.tomvenner.info (click on SmartEquity tab)
 

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remember, you are not required to decrease your cashflow by making extra payments or paying more per month.
But isn't the surplus in your cash flow staying within the 'all-in-one' account equivalent to making a top-up payment on a conventional mortgage.

If you have 5k net income, 4.5k expenses, and use an all-in-one, what happens if I want to spend the $500 this month, then the next, then the next. The mortgage won't be paid off any sooner and no savings in interest.

Now if you don't spend the money, and keep it in the all-in-one OR if you take that $500 and make a top up payment, then you're accelerating the mortgage pay-down. So one type of account (all-in-one) has higher interest rates and monthly/annual fees, and the other (conventional mortgage) has lower rates and no additional fees - both give you the ability to pay off your debt quickly if you're disciplined.

Seems clear to me which is better.
 

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First some background and then my standard explanation of SmartEquity (Money Merge Accounts). Although not new, money merge accounts (also known as Australian Mortgages) are new to the Canadian market. It's estimated at 35% of Australians and British mortgagee's use a Mortgage Acceleration program. Like the 15 year mortgage and the bi-weekly payment program, Money Merge Accounts pay down principal on the primary mortgage more quickly than a traditional 30 year mortgage. They just do it differently. In order for Mortgage Acceleration programs work you must spend less than you make which is known as disposable income.

Money Merge Accounts use the benefits of an open-ended mortgage to cancel interest, thereby paying down principal faster. To use a money merge account, requires a fundamental shift in the way we manage money as follows:

Assumptions: $300,000 Mortgage, $5,000 monthly net income, paid biweekly at $2,500 each paycheck. Unspent income of $500.00 per month.

1. For the money merge account to work, you must have access to an open ended line of credit know as an ALOC or HELOC (Home Equity Line of Credit). Unlike closed ended mortgages, ALOC are open ended meaning that any money that goes into these accounts, pays down Principal and cancels interest. This is distinctly different from a closed end mortgage where payments are made to interest first and principal last.

2. The ALOC or HELOC is used as your primary checking account. To take full advantage of the line of credit, each month when you get paid, deposit your paycheck directly into the checking account/line of credit (HELOC)

3. Lets' assume that you have no debt, just your house payment. You get a line of credit using the equity in your home. At the start of the HELOC, you make a principal mortgage transfer of $5,000 from the HELOC to your primary mortgage. The principal on the primary mortgage is now $295,000 and the HELOC has a balance of $5,000 for a total of $300,000. This single transfer of $5,000 shave 1.5 years off the repayment period for the primary mortgage.

4. Deposit your $2,500 paycheck into the HELOC, which you use as a checking account. This paycheck immediately lowers the Principal balance of the HELOC to $2,500, thereby cancelling interest on 1/2 of the original $5,000 balance. Pay your bills, buy groceries etc from the HELOC. The HELOC balance will climb until you get paid again 2 weeks later when the next $2,500 paycheck is deposited, again lowering the balance on the open ended line of credit and cancelling interest. As long as you keep spending less than you make, the disposable income will continue to cancel and pay down the principal balance of the HELOC.

5. As the principal balance on the HELOC gets paid down, periodic principal transfers take place from the HELOC to the primary mortgage, thus lowering the balance of the principal mortgage more quickly and canceling interest overall.

Benefits: Interest is canceled and as equity grows on the principal balance of the mortgage, it's possible to increase the line of credit. This allows the consumer to have quick access to cash for other investments or life expenses. Much more control over your financial future and the ability to use the equity in the home for other financial and investment opportunities.

Cons: If you are inclined to spend more than you make or do a great deal of impulse shopping, you may want to rethink this strategy. HELOCs have variable rate of interest. If used as designed this interest is irrelevant, however if income decreases or disposable income decreases, the higher interest can become a factor.
 

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This scheme has been soundly debated on a number of forums the best being Fatwallet.com: http://www.fatwallet.com/forums/finance/741118/ if you want to go through the 4000+ posts.

However a web search using the term United First Financial & Scam will provide many references including the respected Red Flag Deals.

The upshot is as Sampson describes. You can do as well without the software and a bit of discipline.

DAvid
 
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