Is Manulife One Worth A Look?
If you’ve ever seen the “What’s your number?” commercial, you might be curious about the Manulife One account and how it works.
The Manulife One account combines your debt, savings and income into one easy to use chequing account. Similar to a traditional home equity line of credit, Manulife One provides you with a secured line of credit – up to 80% of the appraised value of your home.
The Manulife One base interest rate is 3.50%, which higher than other banks’ variable rates, but lower than most home equity lines of credit.
Manulife One: The Basics
Your first step is to use the Manulife One account to repay your other higher cost loans, such as credit card debt and personal loans. This may significantly reduce your overall borrowing costs by consolidating your debt at one low rate of interest.
Next, deposit your savings into the account to reduce your interest costs. This strategy makes sense because you’re likely paying more interest on your debt than you will earn on your savings accounts, chequing accounts and GICs.
Finally, by depositing your income into the account each month, you immediately pay down your debt – reducing your interest costs even further.
Manulife One: The Catch
Since Manulife One works just like a regular chequing account, your money is easily accessible at anytime. There are two problems with this all-in-one feature:
- Like other unlimited bank accounts, the Manulife One account comes with a monthly fee. In this case, the account fee is $14 per month and can’t be waived.
- Unrestricted access to your home equity through a chequing account can lead to spending problems for undisciplined homeowners. Too many Canadians are addicted to spending and use their home equity line of credit like an ATM. Linking your home equity to a debit card could magnify this problem for many Canadians, especially for a first time home buyer.
Consolidating Debt
In 2005, Manulife commissioned a study by Moshe Milevsky to investigate the financial advantages of Canadians consolidating their debt. The study noted that debt diversification is harmful and recommends that Canadians:
- consolidate their debts at the lowest rate possible
- use short-term assets to reduce those debts with the option to borrow back if needed
- manage their debts in the most tax-effective manner possible – reducing their taxable interest earnings by paying down their non-deductible debt
The study showed the average Canadian homeowner could probably save money each year just by optimally managing their debts and short-term assets.
Final Thoughts
Manulife has the right idea when it comes to consolidating non-mortgage debt and short-term savings into one low interest mortgage/line of credit. Note that homeowners will need to have more than 20% equity in their home to take advantage of the Manulife One account.
If you have some equity in your home, but you carry high interest debt, the Manulife One account might be worth a look to consolidate your debt. However, if the temptation to spend your home equity is too much to resist, then a traditional line of credit that is not linked to your debit card is probably a better option.
I think $14 per month is really small compared to the amount people should save per month from consolidating their credit cards at 3.5%. However, I know people who have basically sucked all the equity out of their properties through refinancing. The temptation to get the “quick fix” of cash may alleviate short term symptoms but it can simply lead to more debt and therefore a bigger problem if you are undisciplined.
National Bank has a competitive product called the All-in-One. It is the same product except that there are NO MONTHLY FEES. We have this product and it is great! Especially for those who are self-employed or have varying incomes. We use ours as our chequing account, etc. so that all income is deposited in it and all expenses come out. Investors Group sell these for National Bank as well.
We have had the M1 for nearly two years now and I’ve blogged about how we use it and how it has worked for us. When researching it the biggest issue that people talked about was the $14 fee but this account has saved me more money than $168 a year so I can deal with that. Obviously no fees would be better though.. 🙂
Linda- is the interest rate on the National Bank All-in-one 4%? I did a quick google to see and that’s what I came up with. The M1 interest rate is sitting at 3.5% right now and has been that way for about a year and a half. When we first got the account it was 3.25 and then went up to 3.5%. The difference in the interest rates makes the M1 with the fee the better option in our case.
We love our Manulife One account and it has really been a great product in our case. I was hesitant to go with it because it seemed to good to be true and you know what they say about that. I’m glad we took the leap though. I am hesitant to tell people about how much we love it though because I don’t want to recommend this account to someone who is living paycheck to paycheck and then watch as they destroy their finances by pulling all the equity out of their house. This account is a tool but has to be managed so wisely because the potential for trouble is huge! It was difficult to figure out a way to properly manage this account- more difficult than it seems. I would recommend that anyone considering this account lives on a strict cash diet for some time first and makes sure that they are able to live without going into (further) debt.
The Manulife One pitch is that you should consolidate all debt including your mortgage. However, the interest rate offered is higher than the rate you can get on a mortgage. So, this makes Manulife One very expensive in most cases. I’d avoid it.
This seems like a more viable option that a lot of other thing i have seen.
I am also going to have to give the thumbs up to the National Bank All in One over Manulife One.
Better variable and fixed rates.
What are the National Bank rates? I would be interested in switching for a lower interest rate and no fee but when I google it all I can find is a 4% interest rate for the National Bank All in One whereas the M1 is at 3.5%.
I had the Manulife One and closed it recently. What I found was the fixed rate sub accounts – you can only pay monthly , at the end of the month and it goes into the Main account.The Manulife One rate was also concerning- the advisor said it was Prime + .5 but no where on the legal docs was it and its a rate independent of Prime. I switched to the RBC Home line where in the fixed portion, I got 2.99%, biweekly accelarated and paid down my mortgage and I felt I was just moving debt to debt in the Manulife One account. Go back and check with your advisor as the rate independent of Prime gives Manulife the option to move it anytime, since their stock sucks and they are not doing that well.
Our advisor was very clear that the M1 rates are independent of prime. When we first opened our M1 the rates were 3.25% and they right away went up to 3.5% but have stayed there ever since. While it is a little scary to think that Manulife could change this rate to 15% tomorrow, M1 has a negligible penalty for closing the account so if they did that there would be no reason for anyone to continue using them. I feel safe as long as I am confident that I could easily get a mortgage from someone else. I am always looking to improve things though and might check out the RBC Home Line. Would you say the 2.99% rate is typical? I checked out their site and they were talking about rates between 4.75 and 6 which is confusing to me because that seems really high!?
Marianne… from what I hear, Natbank will charge you Prime + 1 or give you the 3.50% depending if you pay your legal fees etc. RBC like ALL the big banks are offering the 2.99% for 4 years, BMO for 5 years ( but BMO is way too restricted). RBC picked up all my legal/apprisal fees + they paid up to $300 to get me out of the Mnaulife One. If you find your balance has not reduced in the last 2 years to a reasonable amount ( And mind did ) but I could not resist 2.99% fixed for 4 years with full prepayment double up and skip payment options and I floated a portion at the 3.50%. Its not a all in one, but it can be used that way. Manulife customer service was another reason to leave as well..short hours, no weekend for a virtual bank.
Just switched to NB All-in-one from M1. Went through a mortgage broker and got a fixed rate of 3.19% over five years. With accelerated bi-weekly payments our mortgage will be licked in 12 years. NB waived the appraisal fee and gave us a credit toward legal costs. There are no bank fees at all. Three things I didn’t like about M1: banks fees, no physical banks to speak to people in person, no flexibility with payment (and a comparably high interest rate). M1 sounds “convenient” but there is no flexibility with the plan.
Very interested in the low rates that I’m hearing about- hadn’t heard of an all-in-one with lower rates than M1 up until now. It sounds like you guys have negotiated some pretty sweet rates and I didn’t think there was much room for negotiation (if any) with the all-in-ones. Will definitely have to look into this further.
Personally we have not had to use Manulife customer service or do any kind of banking that we couldn’t do online so this experience has been just fine in that regard.
Also- Peter- what are you talking about re: flexibility with payment with the M1? Do you mean that you didn’t have your paycheque go directly into the M1 and they had a problem with that?
Marianne – if you are TRULY using your Manulife One as an ALL IN ONE – everything dumped into the account and you have seen good reduction in your principal over the years and you have good income and cash flow, it will work for you. The RBC HomeLine is not an all in one – but you can do all the work yourself or simply get the 2.99% for 4 years, do accelerated biweekly and pay down & increase by 10% you will be OK. Natbank was always more flexible to deal with than Manulife. Manulife bank is pretty tiny based in Waterloo, hence sometimes they have that small mentality.
Marianne,
The current All-in-One rate is Prime + .5% – so 3.5%.
Everything is negotiable I find when someone is gaining your business or losing it. MI offered me a prefered rate, but I had already signed the legal documents so I couldn’t go back. Kinda ticked me off knowing that the posted rate is really the final rate. If you go through a broker you can get a sweetheart deal with NB.
Peter: Manulife would never offer you anything off the variable portion of 3.50%. No one gets a discount on this I was told, they will budge on the locked in portion which is there mortgage rates but the locked in accounts in the Manulife One is really bad & inflexible.
Would like to know if M1 is a good fit for seniors with no mortgage but would like to have a line of credit for short term loans?
@John – Why not just get a home equity line of credit from your bank?
I like the 1.6% that is paid when the account is in a positive position, also, I went to the BMO to see what their LOC rate is and found it was 3.5% the same as M1
@John – You’ll also need to consider the $14 monthly fee with M1. I think M1 is best suited for someone in the mortgage pay-down stage who maybe gets paid once a month and uses a credit card for most expenses.
The monthly deposit helps reduce your amortization, acting as a float until your c/c statement is due.
In your case I think a HELOC would be more advantageous, but check to see if your bank will charge a fee to set it up for you.
The $14 a month charge is should be a deal breaker. BMO will charge you nothing for your LOC.
That $14 fee would be waived for us
But Manulife will pay all your legal costs, appraisal costs to set up. Some banks want you to draw down at least $50K before they cover, madness. If the account is used as a true ALL IN ONE, then the $14 is not a deal breaker you save a lot more than the other LOC like the ever confusing RBC HLP. Read the fine prints under the 10% annual prepayment on RBC mortgages and locked in HLP – its only ONCE per year, no other time!
Manulife fault is that the hours of the call center is awful.
Scott, them waiving the fee is excellent!
Tom, in John’s case he was just going to use it as a LOC for emergencies/small draws. I don’t believe he needs a mortgage.
I can’t comment on RBC’s product, but I researched both the M1 and National Bank’s All In One and the $14 a month vs $0 a is a no-brainer.
Would like to go with Manulife one but would like my daughter on the account but they sure have made it difficult to add her on my mortgage…..don’t really know what to do.
@Shelby,
Call National Bank.
Just checked NatBank website, there are fees and setup costs for secured lines of credit.
https://www.nbc.ca/en/personal/financing/mortgage-solutions/made-to-measure-mortgage/all-in-one-banking.html
Fees for the All-In-One (fixed transaction fees):
Main account: $6.00/month
Additional accounts: $6.00/month/account
Account for a mortgage loan integrated into the All-In-One: no charge
You are responsible for the property appraisal fees and any legal fees.
We have the M1 and are very happy with it… but the one major piece of advice is to be CAREFUL with your spending… it is so easy to spend all the equity you’ve gained in your house. Husband and I have to do a check of the balance every month, to make sure that it is not just stagnant (meaning that we are spending all the equity that we are contributing) or even worse, going down (meaning we are living outside of our means). Sure there’s a payment that is deducted every month, but this covers the interest ONLY and does not work towards paying down the principle (I believe).