Today's article is a guest post from The Financial Blogger who writes about his experience with the National Bank All-in-One mortgage.  This mortgage product is a readvanceable mortgage which can be incorporated with The Smith Manoeuvre.

Following-up on Million Dollar Journey and Melanie’s work on the overview of the best mortgage products for the Smith Manoeuvre, I decided to share my own experience with the National Bank’s All-in-one. You can follow my monthly updates on my own Smith Manoeuvre at TheFinancialBlogger.com as well as many other articles related to personal finance. 

Product Description 

The All-in-one is a pure Home Equity Line of Credit (HELOC). In fact, there is no “conventional mortgage” attached to the property. Therefore, you get a substantial amount into a form of a line of credit which you can divide into many sub-accounts. The main point of having sub-accounts is to be able to separate different sources of liability under one main loan (the HELOC). By adding sub-accounts, you can keep track of your mortgage, car loan and investment loan with the same lending condition. 

Rate and Qualification Requirements

The All-in-one offered as a first rank lien on your property is Prime + 0. Prime rate is now established at 6.25%. Unfortunately, there is no negotiation regarding the rate as the All-in-one operates as a line of credit and banks are not likely giving you below prime on lines of credit. 

In order to qualify for this product, the credit requirements are higher than regular mortgages. The main reason being that is because the individual will be left with a fair amount in revolving credit. Most people might have hard time managing such amount of credit available anytime. Nonetheless, if your Total Debt Servicing Ration (TDSR) is in line and you have a strong credit history, you should not have any problems getting the All-in-one. 

Implementation of the All-in-one and Main Features 

National Bank’s All-in-one is offered up to 90% of the property value. Please note that the regular All-in-one (which is not insured by GE or CMHC) is at 75% right now. Since April, you do not have to insured a mortgage with 20% cash down. This will apply to the All-in-one shortly but not yet available at the moment. An appraiser chosen by the Bank will appraise your property and determine the value.  

You have the option to split your All-in-one into several accounts. I personally have 3; A for my mortgage, B for the investment part of the Smith Manoeuvre and C for any other purposes. You have the option to set fixed or variable limit on each sub-accounts. Unless you want to add a third party on a small sub-accounts (like your children for example), I strongly suggest to keep all sub-accounts variable. It will provide you with more flexibility and you will be able to operate the Smith Manoeuvre. 

Please also keep in mind that you have the option of ordering cheques and debit cards for each account. As previously mentioned, you have the possibility of adding a third party user to a sub-account. Therefore, you can easily “co-sign” for your children’s line of credit as you will provide them with the access to credit. Each account is accessible from internet or through telephone banking. As it is a line of credit, you can use any sub-account as a regular bank account and keep a positive balance. Many other features are offered and I suggest you to visit nbc.ca for more details. 

What I really like about it 

I think that one of the best advantages of the All-in-one is its flexibility. The creation of sub-accounts with variable limit is a great help setting up a Smith Manoeuvre. On thefinancialblogger.com, I mention how the All-in-one can be used to implement a Smith Manoeuvre. 

The fact that you can use the All-in-one as a regular bank account and with internet access makes this product accessible any time for absolutely any use. This is definitely an “all-in-one” HELOC. As any other type of lines of credit, you can make lump sum payment any time of any amount and there is no penalty fee. 

There is always room for improvement 

Unfortunately, no financial products are perfect. The All-in-one’s rate is set at prime. You can easily beat this rate with a conventional mortgage. The flexibility offered throughout this product as a price and this is being reflected through its rate. As this is a pure line of credit, you do not have the option of weekly or bi-weekly payments. You can get around this by setting up a bank account with the National Bank and set a weekly or bi-weekly transfer into the All-in-one. Unfortunately, this may incur fees depending on the package you chose with the bank. 

Conclusion 

I do not think I will reconsider my choice for implementing a Smith Manoeuvre. I think the All-in-one was partly designed to make the SM easy to operate and the sub-account feature allow a clear tracking of your interest. Its flexibility is definitely a plus for this product. I am well aware there are not many National Bank Branches out of Quebec. However, you might want to look into the Investors Group’s All-in-one (also available with London Life and Great West Life) as they are in a partnership with NB and offer a very similar product. I know also that the All-in-one offered by IG is available for 2nd rank behind other financial institution. 

All-in-one Summary 

I use the same chart done by Melanie on myvirtualmortgagebroker.com. As you can see, there are some differences from my experience: 

Available through: National Bank, Investors Group, London Life, Great West Life.

Maximum Loan-to-Value: up to 90% (75% without insurance, soon 80%).

Minimum Credit Score: I would say over 650.

Maximum Loan Amount: Unlimited.

Available Mortgage Terms: None (Pure line of credit).

Mortgage Interest Type: Variable (Prime for 1st rank, Prime + 0,5% for 2nd rank).

Appraisal, re-advance or other monthly fees: Appraisal fees, registration fees (IG, LL and GWL pay for 1% of the All-in-one value up to $1,500 for overall fees).

LOC Interest Compounding Frequency: Monthly.

Pre-payment privileges: Up to 100% anytime.

LOC is callable any time: Only upon default.

Automatic LOC Increase After Principle Payments: LOC already at maximum of the property value. Need a new appraisal to increase the All-in-one limit.

Must re-apply to Increase LOC after Principle Payments: no.

Home can be reappraised during term to increase LOC: Yes, with a new appraisal and maybe additional registration fees.

Maximum Credit Lines: 5+.

Automatic Investing from LOC: Yes. You simply have to provide a void cheque from your designed sub-account for automatic withdrawal to your investment account.

Portable to another House: The All-in-one must be close and you must reapply.

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FT

FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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ottawaguy
6 years ago

I am surprised there is no discussion about National Bank’s latest fee charge to AIO.
Now it charges $6 for main account plus $6 for each sub-accounts. Any other better alternatives? How to switch?

Tdub
5 years ago
Reply to  ottawaguy

+1 on the new charges in the AIO. I haven’t been paying attention because I don’t use the LOC right now, but I happened to flip over the monthly statement this month and noticed I’ve racked up a -$90 amount in the LOC. The $6 a month charge was added and it’s been accumulating! I don’t recall even seeing notice of this charge, but NB says they sent out notifications 3x. Frustrating to see a “rainy day account” have a monthly fee attached to it now.

Sergey
10 years ago

Could someone explain how to properly set up AIO for personal and investment use.
Here is my situation:

I have $240k available in AIO. Interest rate is 3%. I’m buying a rental property shortly. The downpayment required is $50k, which I plan to borrow from my AIO. I want to be able to track the investment expenses and claim the interest on the borrowed money from AIO. In addition, I want to use the portion of the LOC for my personal use.

Last week I opened a sub-account to track the investment expenses and the interest.

Today, I transfered $50k from my personal LOC account to the investment sub-account for the downpayment. My personal account shows -$50k, and my sub-account +$50k.

Since the personal account is in negative, that’s where the interest will be charged, is it correct? If so, I don’t understand what I gained exactly.

It’s probably something simple that I’m missing…
Please help.

sharp21
10 years ago

Thanks Rob, that was a great article.

You just made my mind up for me!

S.

Canadian Mortgage
10 years ago

Hi Sharp21,

You’re absolutely right. National Bank’s All-in-One can be had with one or more mortgage components (if you want a hybrid mortgage), in addition to up to 99 HELOC accounts.

The All-in-One was relaunched in April 2008 and the new version addressed all the key issues with the old version. Here’s a piece we did on it a while back: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2008/04/all-in-one-redo.html

Cheers,
Rob

sharp21
10 years ago

I was just offered Prime – 0.71% on the mortgage & +.5% on the Heloc. So there definitely is a mortgage attached to it now.

With the changes to the account it would be great if it was re-evaluated by the pros!

S.

Jungle
11 years ago

I think the product has changed and you can now get a mortgage and HELOC in the All In One.

Engineer
12 years ago

I posted this in another post but I think it is better placed here. Sorry for the duplicity.

What do people think about National Bank All in One Right Now?
I have read the posts that follow and some of them are older, it seems the product has changed somewhat.

I am able to get the LOC portion at prime+0% because I am an engineer so that part is attractive (haven’t been able to get this low anywhere else).

We are also able to put the entire mortgage under the LOC portion and only pay prime+0 on that too. Option to lock in at any time.

What do people think of the product currently? We are looking at it in terms of the Smith Manouvre

jazzy
12 years ago

RISKS of this strategy

I have been thinking about these products for over a year, still have not pulled the trigger.

Here is the only scenario where this works:

1. You are generating significant cash surplus every month and dumping into your HELOC acct (this immediately reduces your outstanding heloc on a one-time basis, which is good and equivalent to an after tax return equivalent to the interest rate on the loc). You must not need this cash for current and future expenses, insurance premiums, rrsp tfsa, resp contribs, etc.; and therefore it grows.

If you look at Manu One’s demo, it is really the consistant net accumulation of excess funds month after month that allows the shaving of years of interest off your loans, but the way I understand it, you have to be generating non trivial net free cash each month, that you would normally invest or worse (or better these days) hold in an ING direct acct.

If like many people, you have 2 cars, life insurance premiums, rrsp, resp, maybe tfsa contributions, etc, and you don’t have a lot of excess free cash, whatever you are putting into the account, if anything (worse case scenario you are increasing your loc outstanding because you cannot make ends meet, thus using excess home equity like a chronic emergency fund) will not offset a rate that is potentially higher than a fixed or variable 5 year mortgage that is locked in at the right time.

2. Currently, this product is available at prime + 1. Lucky buggers who got it at prime (sigh).

So the argument that others have made holds, i.e. if you lock in a 5 year mortgage at 4% like today, your P+1 rate on All in one is lower. Why? because we are at historical lows. Those who are lucky will get 4% for 5 years. Those who go variable, who knows? this is the gamble, if inflation kicks in again like in 07, gas prices etc, and boc rate could go to 4 or 5, which may happen, then this product will be at 6 or 7%, so more than a current mortgage.

The variable or floating rate loan is always a gamble, more importantly, the spreads between the bank`s cost of funds and a fixed mortgage are slimmer than with a variable product.

But supposedly over the last 15 years, variable has on average produced better rates than fixed mortgages probably mainly because your chances of locking in a 5 year mortgage at a low rate each time are slim, so the variable rate smooths it out. (google Moshe Milevsky)

Someone said you can get a mortgage below prime. You don’t mean bank prime right, which is 2.50 right now (BOC +1.5%), maybe you mean the loc prime, which is higher, usually at least 1%, +2% or more for unsecured. My ploc went to 5.25% from 4.25%, so P + 2.75%. This is above a 5 yr fixed and variable mortgage.

Please explain what you mean when you say mortgage at P – 0.85%, with an example.

Thanks for comments.

Online Mortgage Broker
14 years ago

Hi Bean, There are no other monthly costs besides the $2.50/account fee and interest. Have a great day, Melanie

Accredited Mortgage Professional
14 years ago

There are a few lenders that offer readvanceable products without any adjustments and no minimums required. I personally have a line of credit portion that automatically changes with every payment I make on the principal of my mortgage. No consumer should have to pay bank fees on this product and I would recommend products that do not incorporate fees while obtaining the best rates available.

When implementing the Smith Manoeuvre, I suggest keeping it simple, there are other options out there.