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.
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.
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.
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.