Manulife "One" Account

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. 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.

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....

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.

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.

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.