One of my older posts regarding the Manulife One Mortgage is still generating a lot of discussion. Basically it’s a battle between the convenience of having all your banking and debt under one account vs. the extra premium that you pay for the privilege.

To quickly summarize the Manulife One mortgage, it’s a giant HELOC that encompasses your mortgage, chequing/savings and other debt. The biggest advantages being convenience and the ability to have your extra cash flow working against the mortgage. The disadvantages being the higher cost relative to getting a regular discounted variable rate mortgage.

Don’t get me wrong, I can see how these accounts can be very convenient to the entrepreneur with variable cash flow. It allows them to lower their monthly mortgage payments to interest only when cash flow is lower, and the ability to make lump sum payments when times are good.

However, for the every day person, is there really any advantage to the Manulife One product? From the many calculations done by the readers (check out the comments in the m1 mortgage thread), it’s apparent that the Manulife One mortgage is much more expensive than obtaining a discounted variable mortgage.

Below is a table based on a $250,000 $200,000, 25 year mortgage created by our resident calculator guru, Cannon Fodder:

Mortgage Type (based on 25 yr mortgage)
Interest Rate Monthly
Payments
Total Debt Paid Additional Cost
Semi-Annual Compounding 4.75% $1,418.64 $425,591
Monthly Compounding 4.75% $1,425.29 $427,589 $1,998
Manulife M1 4.75% $1,438.39 $431,518 $5,927
Manulife M1 w/payment at end of month 4.75% $1,443.95 $433,187 $7,596
 
Semi-Annual Compounding 5.75% $1,562.56 $468,765
Monthly Compounding 5.75% $1,572.77 $471,828 $3,063
Manulife M1 5.75% $1,581.48 $474,444 $5,679
Manulife M1 w/payment at end of month 5.75% $1,588.89 $476,666 $7,901
 
Semi-Annual Compounding (prime – 0.90%) 3.85% $1,294.80 $388,441
Monthly Compounding (Canadian Tire FS) 3.85% $1,298.97 $389,693 $1,252
Manulife M1 4.75% $1,438.39 $431,518 $43,077
Manulife M1 w/payment at end of month 4.75% $1,443.95 $433,187 $44,746

Here are a couple of key points about the table above, the M1 calculations include the monthly fee of $14/month (free for professionals). The last few rows are what’s really significant in terms of cost difference between a discounted variable rate vs the Manulife One mortgage. You’ll notice that for a $250,000 25 yr mortgage @ todays rates, you’d end up paying over $43,000 more for the M1 mortgage over a traditional discounted variable.

My opinion is that if you want the convenience of having a HELOC but want the best bang for your buck, then consider going with a discounted variable readvanceable mortgage. That way, you’ll get the best variable price for the installment portion along with a growing HELOC to use as you please.

Any thoughts?

157 Comments

  1. Chris B on December 2, 2008 at 12:48 pm

    I thik, as noted, the greatest advantage is for the self-employed. Myself and my partner are both self employed, so we have variable cash flows, but also must set aside money for the taxman. So, for three months at a time there is a little pot of money that is reducing the principal. Every three months, it gets paid and we start again. This is money that would be earning (taxable) interest if we had a normal mortgage, but instead it is applied to our mortgage, and saves us a little bit extra.

  2. Mark M on December 11, 2008 at 3:26 am

    We have a Manulife One account and are very happy with it. You must have self-control with this account or you will spend yourself to the poor house. You can’t view your available credit as your money to go and spend. I view the remaining balance as debt and am trying to pay off this debt as fast as possible. We have a $200,000 mortgage now and we should be able to pay that off within 5 years. There is no way we could have done this with a traditional mortgage. Making a prepayment is murder. It took us 3 weeks to get a prepayment on our Royal Bank Mortgage. Not to mention the time to make the appointment, wait at the bank, listen to them speak about other products, all to make a payment. 1 day is all it takes to transfer as much as you want to your mortgage via the computer. (we have a seperate chequing account and transfer all remaining money into our M One) We watch every penny we spend, knowing that what we don’t spend will go toward the mortgage. We transfer almost half of our income directly to our M One. A traditional mortgage is built to keep you paying for ever. The M One account for me changed the way I look at my mortgage, no longer a 25 year ball and chain, but more like a quick 5 year car loan.

  3. Thomas on December 21, 2008 at 3:32 pm

    Tons of great information. I am not a financial guru but I have become aware of how the banks want to keep you paying forever. I recently had our CFP leave me info on the M1 saying it would be good for our situation.

    26000 debt cc, loc, student loans
    70000 mortgage renews September 2010
    we make less than 100000

    We have recently started budgeting properly because we were a financial blackhole but luckily we caught it in time. Another factor that makes this more difficult is that we are both self employed and our income fluctuates, it is not possible to know what we will make from month to month. We currently have a FirstLine mortgage at 5.5% with bi-weekly payments. Would this product help us get out of debt quicker as we have become misers and we don’t really owe that much. If anyone could point me in the right direction that would be great. I want to make sure I have a complete understanding of what the CFP is presenting to me so I can make an informed decision.

    Thanks

    • FrugalTrader on December 21, 2008 at 5:43 pm

      Thomas, note that M1 rate is no longer prime, it’s at their base rate which right now is about prime + 0.5%. If you can find a regular discounted variable mortgage, or even at prime, you would end up saving money vs. the m1.

  4. Thomas on December 21, 2008 at 9:05 pm

    I would like to have access to the equity in the home to consolidate while killing the mortgage at the same time. I have seen some talk about the SM and readvanceable mortgages. Im new to researching these type of options I just don t want to get screwed. I guess what I want to know is what info should I be looking at to determine what is a good option.

  5. DAvid on December 22, 2008 at 11:26 am

    Thomas,
    Before you jump to the M1 re-read the comments on this and the original Manulife One thread. There is little Manulife offers that could not be accomplished with your current bank. For instance, you could add a HELOC to your current mix and consolidate your debts there. Your mortgage would stay at it’s current payment and you would place as much against your HELOC debt as possible based on your monthly income. Once you have paid off your HELOC you can apply extra moneys to your mortgage, paying it down in short time.

    Unless you are paying a very high interest rate on your mortgage, and will get a really good rate on the new, you should NOT move to another product, as you will pay 3 months interest penalty. At your current rates, it would take about 18 months to recover the interest penalty you would pay, plus you would have other discharge & closing costs on the transfer.

    Your first step should be to consolidate your CC and LOC loans at a lower rate and pay them off ASAP. Your student loan is likely tax advantaged, it may be wise to leave it alone. Your mortgage should be left where it is until 2010, when it comes for renewal, unless you can lock in at more than 1.5% interest rate difference.

    BTW, go to your banker and present your wish to pay your debts sooner. You might be surprised at the soultions proposed.

    BTW, with a gross family income of $100,000, you are in the top 25% of income earners in Canada. With the tax benefits self employment brings, you might actually be in the top 20%!

    DAvid

  6. Thomas on December 22, 2008 at 12:43 pm

    DAvid,

    Thanks for the advice, Im going to look at what we can do to remodel what we already have. Have a great holiday.

  7. BNS Banker on February 20, 2009 at 1:20 am

    I do work at Scotia, we offer the STEP, Scotia Total Equity Plan. Many of my clients use it and use it well. We can lend up to 80% of the value of the home. Under the STEP you can have: 3 mortgage components(fixed&var), 3 lines of credit, 3 line of credit visa’s, overdraft, 3 regular visa’s, term loans, small business loans etc. Up to 11 products.

    We call the limit of the STEP your GLOBAL limit, as the term products are paid down, we can increase the limits on the revolving credit(lines of credit as you go).

    Keeping LOC’s separate for interest expense’s…ie smith maneuver.

    Most clients, split up thier mortgages, part variable, part short term fixed part long term fixed.
    With our mortgages you can also: Prepay up to 15% of the original mortgage amount each year AND make double payments AND increase your payments 15% per year.

    I believe it is the most versatile product out.

    We register a collateral charge on the property, so as the value of the home goes up, you can increase the global limit of the STEP without any further legal fee’s. Subject to you affording the STEP and appraisal of the property.

  8. bc on May 28, 2009 at 4:17 pm

    This article is now out of date.

    The rate environment has changed drastically and now all banks are charging the same “premium” on their HELOC’s – and worse yet, in many cases existing clients are no longer being grandfathered at their old rate.

    Further, minus variable rates simply don’t exist anymore. So all of those lucky ducks out there paying sub 2.0% mortgages are going to be unhappy when renewal kicks in.

    Personally, I love my M1 account. My wifes income is stable, and mind variable. All in all our expenses per month (not including the “mortgage”) are about $3750.00 – and our income is over $6k.

    I don’t know about you, but I don’t know many people who make $2250+ mortgage payments on a $240k mortgage.

  9. cannon_fodder on May 28, 2009 at 7:38 pm

    bc,

    I was shocked to hear of mortgagees receiving letters noting them that their base rate actually went up even though the BoC rates were going down. Fortunately, even though I’m with BMO (where I heard they were party to this exercise) I had their Readiline product and it has continued to go down.

    We renewed our mortgage at about $117k last summer and we are making $2500+ monthly payments plus periodic lump sum payments (bonuses, tax refunds, dividend income, etc.). It should be discharged sometime late next year – probably before we see any significant rises in the interest rates.

  10. DAvid on May 28, 2009 at 9:46 pm

    bc said: “I don’t know about you, but I don’t know many people who make $2250+ mortgage payments on a $240k mortgage.”

    That’s OK, I don’t know many people who have $6000 net income monthly. I do know quite a number who pay their mortgage and other debts aggressively.

    I do believe the points made in the original article are still valid: do your research before arriving at a decision, and don’t believe everything marketed to you.

    DAvid

  11. bc on May 29, 2009 at 10:38 am

    Fair points, guys.

    I just wanted to quiet some of the notions here that Manulife did something funny with their rates that wasn’t industry wide – that and variable rate mortgages are now “prime +”.

    Only a wild amount of cashflow could result in a savings equal to a 1.60% mortgage, I recognize that, but unfortunately that rate isn’t a market reality at the moment.

    One thing that hasn’t been mentioned here is the fact that alot of people don’t use their savings to make lump sum payments on their mortgage. People have good intentions, but when it comes down to it, putting their rainy day fund into a mortgage doesn’t sit well. So for those people the M1 works (assuming they at least have the restraint not to spend the money unless it is an emergency or an otherwise budgeted item).

  12. cannon_fodder on May 29, 2009 at 12:13 pm

    bc,

    From what I’ve heard on the ‘net, MFC was simply the first to stick with the concept of not lowering their base rate in tandem with BofC. On the other hand, I haven’t heard that they’ve gone back to clients and actually increased rates to existing clients or told them that any future advances on a HELOC would now be at a much higher rate.

    I still remain skeptical that an M1 type product will, either consciously or subconsciously, change the behaviour of people over the long haul (i.e. for more than 10 years) in a way that they will be out of their mortgage sooner.

    For example, let’s take a $240k mortgage at 5% amortized over 25 years. This gives monthly payments of almost $1,400. Let’s imagine that a couple has an extra $250 a month that comes in which doesn’t get spent and it goes up annually by 3% (inflation). With the M1 that is applied every month resulting in their mortgage being discharged 7.42 years earlier all things being equal.

    My issue is that without the M1, this couple is receiving $3,000 of discretionary income (in today’s dollars) every year for over 17 years. I find it hard to believe that most couples, according to Manulife, would fritter away that kind of money each and every year without knowing it because they don’t have the M1 to change their ways. I think such a change would be noticed and felt over the long term. You would realise that you don’t go out for dinner as often, or your clothes are looking a little dated, the house needs a new paint job, and boy, or that it has been quite awhile since you went on a vacation.

    On the other hand, let’s say this couple did realise and embraced this new paradigm. They saw that they were careless in their fiscal responsibility and got excited by how quickly their debt was declining. Once they have seen the light and are fully aware, they don’t need the structure of the M1 anymore. Most mortgages these days have the option for increasing the payment amount, doing lump sum payments, etc. I’ve run the figures for just how much $ is saved by the M1 if you simply look at the timing of credits/debits and believe me, it is quite small even in the most ideal of cases (i.e. all your income arrives on the 1st day of the month and all of your expenses are paid on the last day of the month). The only substantial impact is if you leave income stay there and don’t remove it when it otherwise would be spent.

    Could the M1, and others like it, be a catalyst for discovering a smarter way to handle household finances for some people? Yes, I do believe it has that potential. Once learned, then those people have the option to choose more frugal ways to master their debt. (I say frugal because for the majority of the time that M1 has been in existence, it’s rates were higher sometimes egregiously so than other options out there. Plus, M1’s rates are compounded monthly and they even acknowledge on their website that it costs more than a semiannual compounded mortgage. Finally they do have those monthly fees.)

    I needed training wheels to learn how to ride a bike, but once they were removed I never put them back on.

    What I can’t envision is that people would choose the M1 because of its promise to make them mortgage free sooner and then blindly be unaware that more of their discretionary income is being applied to their debt – and this is the only way that they are going to see any improvement vs. a traditional flexible mortgage. If there are such people, then they would be the only ones that would be better off staying with M1.

  13. DAvid on May 29, 2009 at 12:46 pm

    Also, the rate spread is beginning to show again. BNS offers 2.75% variable, and the other big banks are offering 3.05% on new mortgages. So we are returning to a 0.5% difference in rates again; about the difference when this product was first discussed. Once normalcy returns to the market, I expect we will see this short-term disruption of prime minus (or the equivalent) to return to its former pattern.

    I believe that although Manulife markets the M1 as a means to quickly pay one’s mortgage, the reality is they want you to have a mortgage for life. That way they continue to gather interest payments for a longer period.

    I agree a lot of people don’t use their savings to reduce their mortgage costs. A lot of folks don’t pay their credit cards in full each month either. There are many actions in which folk could engage to reduce their costs & debts, however not all take the step. I expect many will see the available credit on the M1, and use it for consumptive spending, just like folks do when they realize their other debts are reduced. Thus, we see all the renos or cottage purchases that occur once the original mortgage is paid. Call it Human Nature.

    DAvid

  14. DM on August 10, 2009 at 3:39 am

    Hi everyone, I was pretty excited about signing up for the M1 as my friends are really happy with it. This blog is stressing me out though.

    I am purchasing a house for $425,000 and putting $85,000 down. That will deplete my savings and investments.

    I will make $68,500 this year and it usually goes up 6% every year.

    I will rent out 2 rooms in the house for around $1000/month total.

    I usually save around $1000/month on top of a $690/month rent that I currently pay.

    I have no debt.

    I have been offered a M1 at 3.25% (p+1). The advisor told me that as rates go up and banks start offering p my rate will automatically be adjusted and that no renegotiating will be required.

    If people are still reading this blog I would love to hear some people’s thoughts on the M1 and my situation. If I didn’t include enough info let me know. I am new to serious finances.

  15. DAvid on August 10, 2009 at 12:25 pm

    DM,
    One simple question: is 3.25% the best rate you can negotiate? Every 0.1% you can shave off the 3.25% rate will save you $28 per month.

    Historically, M1 has been at prime, while other banks have been at prime -0.75 or better. For instance RBC is offering P+ 0.4 and P+0.8 on their variable mortgages just now. Also, with historically low interest rates, is this a time to consider a fixed rate? It is pretty clear prime won’t be sitting where it is now in the foreseeable future. Might 5 years at 4.29% (ING) be a better deal in the long run?

    No simple answers here!

    DAvid

  16. James on August 22, 2009 at 8:37 pm

    Does anyone know where I can get a copy of an excel spreadsheet that has all of the calculations of the Manulife Calculator? or if anyone as something similar they have created in excel?
    Thank you!!
    James

  17. cannon_fodder on August 23, 2009 at 8:30 pm

    James,

    Try Canadian Money Forum where you will find several spreadsheets at http://canadianmoneyforum.com/showthread.php?t=897

    The Loan Comparison Calculator offers a take on the M1 calculations.

  18. DAvid on August 24, 2009 at 12:26 pm

    Thanks for sharing these cannon_fodder!

    DAvid

  19. Allen on September 1, 2009 at 12:26 pm

    Ok, well I’m a new guy here. I’ve read this blog and a few others about the pro’s and con’s and I’m still sitting on the fence.

    I am currently a customer of RBC out west and have been for some time. I’ve got 2 LOC’s, both unsecured, one for $60K @3.25% and one for $5K @3%. I don’t have a Homeline but I’m really concerned about the amount of interest I pay out over the course of say this mortgage ($315K balance on 30yr accelerated bi-weekly payments @5.1% fixed 5yr closed).

    The problem to me is that I need to get a way of making this pay down faster but I also require more flexibility incase employment gets a little bumping in the next few months.

    This is why the ML1 looked good to me. But now, I’m not so sure? With a large penalty on the RBC mortgage I want to sit here and not deal with that but in turn figure out a way to instead use the LOC or HELOC (homeline) as the primary chequing account, similar to the ML1 which I read was done with a credit union in an above example.

    With the existing chequing account there are months with cash flow is tight or completely the other way based on lack of funds coming in. This means overdraft – yet that interest is something horrific like 38% if I’m not mistaken. Our RBC Visa is 19.5% and they still make BILLIONs in profits so why would they give me a break?

    I’ve thought about the SM but have leaned away from that with issues of cash flow and leveraging adding to the risk of what could happen.

    If anyone is reading this still I’m interested to learn all I can before I meet with the bank and ML today and tomorrow.

    Cheers,

  20. Ronald on October 26, 2009 at 6:30 pm

    I now pay 3.25% interest for my Manulife One mortgage.
    Is anyone paying any less on a Heloc at another institution?

    I had paid it off in 5 years instead of the remaining 21 years.
    I saved over 100,000 dollars in interest.

    The 14 bucks a month for unlimited banking is comparable to other banks.

    I took some money out again to invest in the stock market. (Interest is tax-deductible). I’ll have that paid off in a few years and still have my stock portfolio.
    I bought a vehicle and just wrote a cheque.
    Vehicle will be paid off in 2 years.

    It’s like I run my own little bank.

    I never have to ask for loan ever again. I have one simple account that I use for almost everything.

    I have been using it for appr. 5 years now and I would not use any other product that is currently on the market.

  21. DAvid on October 27, 2009 at 2:15 am

    2.25% HELOC.

    DAvid

  22. mietek on November 6, 2009 at 1:44 am

    Allen, pay the penalty and start using M1 (as long as you have at least 20% in equity). You’ll never regret it. My principal is shrinking two times faster than with RBC not so long ago! On top of that I bought a new vehicle and spent nice couple of weeks in Cuba. Being with the regular bank I could never afford it, and guess what! The amount that I owe now is much lower than it would be with RBC (a few months ago I printed a sample of RBC payment table just to see and compare).

  23. Allen on November 6, 2009 at 12:32 pm

    Well, I still have not made a decision. I am now looking at a local credit union for a similar sort of solution.

    I’m being offered:
    $248K mortgage at 2.35% VR / 36m
    $100K LOC at 3.25% VR
    $40K LOC unsecured at 5.25%

    The reduction in interest even this way is amazing but it is still a little restrictive. I still haven’t worked out all the details of it yet.

    What do people think?

  24. mietek on November 9, 2009 at 12:17 am

    2.35%, 3.25%, 5.25% …That’s not what M1 account is about. It is about paying your motgage off 3 or 4 times faster than in a “regular” arrangement. When I was with RBC I always pumped some or most of my “left over” income into the mortgage in order to reduce it fast but ended up being stressed out every single day thinking if I had enough money for anything else and using line of credit to cover my shortages. Now every single dollar of my income reduces the principal right away and there is no stress!!! That’s the main element of this amazing system, not the interest rate! All of you so called mortgage specialists can argue as much as you want but I guarantee that I’d pay my mortgage off quicker with 3.25% rate than with a 1.5% rate in a traditional deal. You don’t need a software or even a calculator to prove it. A calendar and a total of what you owe is enough.
    Allen, don’t make your life too complicated. You might forget how to enjoy it.

  25. Allen on November 9, 2009 at 1:53 pm

    Thanks.
    Currently, the credit union I have been talking to is now telling me that it may not make sense to move due to the penalty of the existing mortgage at the RBC. This is similar to the conversation I had with the rep from ML1 and now puts me in a bit of a bind. The credit union is now saying that if rates climb I won’t save the sort of money I have been considering yet with the recent press releases of BofC it indicates that there won’t be any increases in the prime rate until the economy starts to really show signs of strength. If that happens soon it won’t really matter much but if it happened later than the outstanding 27 months I have left on this mortgage then I would have missed out on the lower rates over that time.

    I must be missing something key.

  26. Allen on November 9, 2009 at 6:31 pm

    Well, after much consideration it would seem that the only person I have talked to over this specific situation that understands why I want to be debt free is the rep from ML1. The Credit Union with all their restrictions and chequing accounts tied to each of the LOC’s doesn’t make this any simplier.

    In fact they don’t get it.

    I don’t want to be in debt and I feel that is can be done but because of the excessive $13K penalty on the existing RBC mortgage it can’t be done as simply as I would like it to be.

    That is a shame really. If I had done this 3 years prior before the realestate market corrected itself there would be more room to make this work. Right now it doesn’t.

    The simple reality is that I was looking for a massive operating LOC but that no one lending group was interested in taking it on.

    Any other suggestions?

  27. mietek on November 22, 2009 at 1:37 am

    I know this would sound ridiculous for most of people but if I was in your shoes I would pay the penalty and move to M1 or “All-in-one” or whatever it is called. $13,000 would disappear pretty quickly and your financial “problems” would seize to exist the moment you switch. That’s how I feel about it right now and the only thing I regret, is that I did not sign up for it much sooner. I am the ManulifeOne customer for a while now and I’ve never been happier with my finances. If you want to save $14 go to Canadian Tire or National Bank and be $14 happier. Anyway, everybody is different and everybody’s life styles or priorities are different. Some people need more vitamine C and some need more vitamine D. Some of us have 2.5% mortgage and laugh at people that pay 3.25% interest and some of us don’t have any mortgage … You have to decide for yourself. Don’t let any reps (even the one from M1) decide for you, and you will never regret it.
    I hope you’ll find peace of mind and happiness soon.

  28. Allen on November 22, 2009 at 2:13 pm

    Well, I’ve decided for the interim that using my existing RCL as my suo version ML1 account will work just as well. I have set up everything to get paid from and depositted to that account. So far so good. Not really simple but it will work for a while. Things are getting bumpy in the employment for the next quarter so I went back to the RBC and said hey can we get this RCL limit increased for a just in case situation, the answer was not a chance, in fact the RCL’s interest rate programs are all getting adjusted to increase their rates to reflect this new reality we are in. New reality? since when does the RBC give a rat’s ass about it’s customers? The fees prove that.

    I don’t know what all that means but we will see.

  29. Allen on December 17, 2009 at 2:30 pm

    Mietek,

    I am beginning to think you could be right. The run around I am getting from the RBC right now on a number of things relating to rate increases are incredible,

    I have contacted my ML1 rep again and want to look at this in more detail.

  30. Paul on December 19, 2009 at 1:05 pm

    We’ve had an M1 for over 5 years. In that time, we’ve actually increased our debt. I think in concept the M1 sounds like a good idea; however, you have to be very disciplined. Obviously, these all-in-one HELOC’s were created because they know that the majority of us aren’t disciplined enough and will continue to use this extra credit.

    Having said that, we are converting back to a conventional variable mortgage and dramatically reducing our LOC. We’re looking at the RBC Homeline right now since we’re already an RBC customer.

  31. Allen on December 19, 2009 at 2:54 pm

    Paul,

    There is no reason to say that you would not do the same with the RBC. Yet in my recent experience they will provide you nothing to assist you in getting out of debt faster beyond the 20% payment increase. This is difficult if you are limited in cash flow or have less drive to get it done.

    Personally, it has lots to do with the personal relationships that you have and I had a really god one with a planner there for a number of years. She retired and now I have this kid that couldn’t find his way out of a paper bag with the bottom cut out. His response is “ask your mom for help”. Well, I make and payback nearly 5x what my mom does in a year. The only difference there is that she is mortgage free and I am not.

    I’m still convinced that if you can do it right the ML1 method (not necessarily their product) is the best way to get it done.

  32. Paul on December 19, 2009 at 7:48 pm

    Allen,

    My feeling is that with the conventional mortgage we’ll be in a better situation financially because the money will automatically go into paying down the mortgage.

    If we were disciplined, I agree that the M1 concept is quicker to pay down than a conventional mortgage; however, the past 5 years have told us that we aren’t disciplined.

  33. Lisa on February 6, 2010 at 6:26 pm

    We have had our Manulife account for 8 years now. We love the flexibility of it and that’s why we chose it. We have increased our borrowings over time but we also have purchased 50,000 if investments, a waterfront cabin (right before prices skyrocketed) a new boat, dock, and boatlift, upgraded both vehicles and have lived a great lifestyle. Had we not chosen Manulife One the bank would have never loaned us the money to purchase the waterfront property (which has more than double in price) so you can go on all day long about points, percentages etc etc etc. The bottom line is you need to spend less than you earn and make sure your account is getting paid down. We will be completely debt free in 2 years and 9 months including our principle house and are considering a third property purchase. This would have NEVER been possible with a convential mortgage.

    • FrugalTrader on February 8, 2010 at 9:43 am

      Lisa, the alternative would be to get a readvanceable mortgage and use your home’s equity that way. As well, the installment portion of your mortgage would have had a lower rate.

  34. Mike de Mahy on February 16, 2010 at 12:45 pm

    Hi Cannon

    The wife and i are really in a dilemma. Our mortgage is at 135000$ at a rate of 1.65% until 2013 (flexible Scotia) and a credit line of 50K maxed out Our net monthly income at 3100$. and expenses 2900 (includes everything taxes mortgage food etc.) We are frugal -have to , only one income
    We are debating this ManuOne account.Naturally , the Manu agent is pushing for us to take it , stating the flexibility and convenience of the plan.
    Is this plan good or not .Lots of comments .So many questions and so many different answers

    Mike d

    • FrugalTrader on February 16, 2010 at 1:06 pm

      Mike, the question you have to ask yourself is that if you tap into the equity of your home, are you going to spend it? M1 will not come anywhere close to the 1.65% mortgage that you have now.

  35. DG on February 16, 2010 at 1:07 pm

    Mike, you have a very good mortgage rate right now. If you throw it away and go with M1, you will have almost an extra $200 of interest expense per month. I think that money is best put towards reducing your debt rather than “buying flexibility”.

    Can you think of any specific cases where flexibility of the M1 helps you? A regular mortgage with a LOC (which you have) can provide much of what M1 provides.

    Dan.

  36. C on February 16, 2010 at 1:11 pm

    Why don’t you go into scotia and ask to have your VRM converted to a STEP. They have a legal fee waiver program where as long as you have your daily banking with them and have a mtg and loc under the step they pick up the legal costs. Well worth it, and much better than a M1, and no monthly fee.

    I have a step with a a VRM and a fixed rate mtg, and 2 LOC’s, and a travel visa, all secured by the home, has saved my 1000’s per year.

  37. Mike de Mahy on February 16, 2010 at 2:26 pm

    Many thanks to everybody for all your advices

    Scotia was very happy to accommodate us . The STEP is perfect for us.
    Thanks again for all your responses

    Mike d.

  38. C on February 17, 2010 at 1:54 am

    Good to hear Mike, I have implemented the (borrowing to invest/smith maneuver) over the last 3 years using dollar cost averaging, and it is working out very very well.

  39. Caddy on February 25, 2010 at 5:18 pm

    What high cost of Manulife One? In 20 months my wife and I have decreased our mortgage by $85K and reduced our monthly interest payments from $865 to $385. Why would we care about paying a $14 monthly fee when we can pay off our mortgage in about 4 years and save 10’s of thousands of dollars in mortgage interest.

    Who cares if you can find a 5 year fixed term at 1.65%. At the end of the five years, you will have paid very little off your principal and you’ll get screwed by the new increased rates. Good luck in paying off your mortgage then.

    The calculations presented at the top of the page by Cannon Fodder do not represent what actually happens in a Manulife One account. To put it most politely, his calculations are grossly misleading. You don’t make fixed payments in the Manulife One account. The very day that your paycheque is deposited into the account, it is already reducing the interest paid on the mortgage (your interest is calculated daily). Assuming you earn more than you spend, you are coming out a winner. If you are spending more than you earn, then you are simply irresponsible with your money.

    One thing is true…the Manulife One is not for those who have champagne tastes on a coca cola budget. If you’re smart enough to take advantage of a Manulife One type of account, you’ll thank yourself daily. If you want to be foolish with your money, then there isn’t any account/mortgage that will save you.

    The Manulife One account has really given my wife and I an incredible head start. We’re young, have paid off a huge portion of our mortgage, and have been able to afford a rental property in which we’re profiting on.

    What else can I say?

  40. mietek on March 7, 2010 at 11:56 pm

    Caddy, I have been thinking about investing in a rental property. Do you use separate M1 account for that property or a sub account? How about deducting interest $ from your income? Can you do it?

  41. Allen on March 8, 2010 at 1:26 am

    Ok, here’s one for the pro’s here:

    What do you think is the best thing to do should you be newly self employed such as myself? Pay a litte here and a lot there?

  42. Caddy on March 23, 2010 at 11:01 am

    Mietek, we use a sub account for the rental unit. Works fantastically. You absolutely deduct the interest from your rental income, along with a long list of other expenses. As far as M1 is concerned, it keeps track of all the interest charged on your sub-account. On the last day of every month you will be charged interest on your sub-account and on that same day the interest amount will be paid from your main account.

    Good luck with your endeavor!

  43. ComputerDoc on January 24, 2011 at 11:30 pm

    I agree with Frugal Trader and DaveRamsey.com.

    If MOST Canadians were disciplined there would NOT be so much credit card debt.

    Just heard this year, January 2011, that Canadians have gone into EVEN more debt than before since the financial crunch seems over.

    I wonder if MOne contributed to that debt?

  44. Darrell on March 31, 2011 at 3:50 pm

    Great Article.

    I have done some long an hard thinking and their are benefits to both sides. This is what I have on the table.

    RBC (my bank)
    Is offering a 243k mortgage 5 year variable -0.90 off prime which puts me at 2.10 today. Weekly payments of $204.00 with the option of doubling this payment every week and a maximum of 10% additional principal payment each year.

    M1
    Is offering no monthly fee 243k account with 3.5% interest calculated daily. Like any other LOC you can get a letter in the mail saying “in 60 days your rate is now 4.2%” and in another 60 days “we are increasing your rate to 5.5%”. They control the rate and can change it at anytime.

    After reading the posts above you can tell there’s a lot of M1 sales guys posting. The key points I’m hearing is M1 is better cause you can pay off your mortgage faster if you have focus.

    In the proposal I have on the table, at anytime, I can jump right in and dump another 200 or 400 or 600 towards principal and plan to do so with the benefit of holding the 2.1 interest rate.

    The painful part of this option is knowing the first 5 years the bank is getting paid. With M1 you can pay it all today and its done. The huge problem here is M1 can change your rate to 8% tomorrow and you can’t do a single thing about it. Another problem is you can take a vacation tomorrow and dip till your hearts content.

    I’m not in a position of paying off my mortgage in 5 years so M1 and RBC will be getting paid. The difference is M1 will be getting more as there charging more now and will always charge more. I still have the freedom to add as much to principle as I can now with RBC as with M1.

    If you don’t have the focus to do this, can you imagine what that individual will do with an M1? They’ll have the M1 account for 30 years with the exact same balance on their.

  45. Chad on April 21, 2011 at 1:46 am

    Just open a Heloc at TD and you can do everything the manulife one account does and you don’t have to pay the $14/month…Including setting up your direct deposits going into the heloc and putting it on your debit card.

  46. Chris on October 5, 2011 at 7:12 pm

    I found it very amusing that a lot of people on this thread got very hung upon the $14 monthly fee for M1 account or the fact it is a P+1%… :-)

    First of all, M1 has a lower rate even though it’s P+1% (note, every bank set their own prime rate and this is why you shop around for mortgages). It has been 3.75% for quite a few months now, while National Bank All-in-One is at 4% and TD variable open (which I assume it’s what they use for HELC) is 3.8%. Run those delta against a small mortgage like $100,000 and the argument for the $14/month fee should just go away.

    I have my doubts about the math used in this article – it doesn’t make a lot of sense to me and I would love to see the formulas behind it.

    Personally, I signed up for M1 because it gives me a lot of flexibility to manage my finance. Yes, discipline is required, but the flexibility allows me to put in as much cash as I have without having to worry about the over-contribution limit in the traditional mortgage and my mortgage was paid off within 5 years of switching to M1 after spending 4 years doing the traditional mortgage (bi-weekly payment, 18 years amortization and etc) and saw my mortgage decreased way too slow to my liking (the mortgage payment went against mostly interests payments instead of the principal). In addition, M1 allows you to have virtual sub-accounts that you can use it to fund “Investments” and generate additional income from the equity of your home while deducting the interest you paid to earn those income.

    M1 was sold primarily through advisors (and apparently I was one of the few who called them up directly) and the idea was the advisor will help the client to manage their spending habit and M1 would be part of the tool to enhance the client’s financial wealth. M1 can only help you pay off your mortgage faster if you are a disciplined saver. I know of a friend who signed up for M1 before I did and never did make any head wave on his mortgage ‘cos he just treat it as a credit card with large limit… :-(

  47. J on May 14, 2012 at 7:16 pm

    We have the M1, and paid off our $220,000 mortgage in 7 years. We have some disposable income which helps. This mortgage is not for people living paycheck to paycheck or those who think that you will always have a car payment and a house payment for the rest of your life. We set a goal that any extra income goes to our M1 account. Yes the interest rate is higher, and there is a monthly fee, but I’m pretty sure most savings and chequing accounts also have monthly fees. My monthly fee is unlimited. I will gladly pay more interest and monthly fees to have the freedom to pay off my mortgage, and save literally tens of thousands of dollars in interest. We now also have the ability to make purchases, a car, vacation, etc. without having additional loan payments. I’m also a person who thinks its better to buy a used car at $15,000 dollars, putting it on M1 and paying interest (knowing that I will have that paid back off in a minimum of a year, rather than buy a new car at $30,000, at 0 percent interest, but payments for 7 years.

    For this account to work effectively you must have a certain level of extra income at the end of the month. We had a friend who used this account and after a year had to return to a traditional one because he owed more, using the extra value as spending money.

    I think you also have to keep in mind, that this account is the only one I need, most people also carry credit cards, and loan payments at ridiculous interest rates. With this account, you don’t necessarily need those….

  48. Marcus on January 5, 2013 at 8:46 pm

    How old are these posts here? Because I am not sure if what was discussed so far is still applicable today….
    I’ve read most of them, trying to figure out if an account like Manulife One would be better than a HELOC, used as a daily checquing account.
    Basically, get a HELOC for the value of the mortgage, and have all your paychecques and additional income to go there. Wouldn’t this be the same as an All-in-one account, but with lower interest rate???
    I have a variable P-0.75 mortgage with CIBC right now (with two years left on the five year term), but I was considering the other options available.

  49. AM on November 18, 2014 at 6:47 pm

    At the end of 2014, M1 is still one of the better deals out there for paying down your home faster.

    Rules have changes a bit since inception, but essentially works the same, with the exception that you have 15% of the total loan which requires payment and is not available to the borrower. Also, the need to have 20% down upon opening an account (at a minimum) also means that not everyone will qualify for an M1.

    The rates are a bit higher than a typical mortgage, but given the very low interest rate, and ability to transfer a portion of the main lump sum into a low fixed rate, you really can’t go wrong.

    This is STILL an account for the fiscally responsible. After paying into the account, it’s really easy to see that “available” credit as free money (which it’s not).

    For us, it was a great decision because the house we bought did not have a finished basement. Because we did a lot of the work ourselves, we had the option of borrowing against this LOC to pay for supplies and the as-needed contractors. Very convenient and the M1 interest rate was at least 1% lower than most of the LOCs currently offered through other banks these days.

  50. Ted G on February 22, 2018 at 6:53 pm

    Hi,
    Im in a job where I can be posted regularly and may not want to but at next location (I.e Goose Bay) ?. If I got the M1 HELOC, would I be spared fees assoc. With early payment of mortgage? My mort renewal is in 4 months and my banker recommends 3 year variable where I would pay 3x months interest upon sale of house. Thanks.

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