Have I missed something here? also $14 a month is quite competitive to other chequing accounts out there.

Why does your web site have a link to ManulifeOne? Or why does “Lee” comment 218 have a link to your web site? If you have a change of heart about M1, no big deal, just don’t play both sides of the fence. Maybe “Lee” can give us an update on his mortgage since he seems to be linked with Dustin. I am in Kelowna at the end of July maybe I can meet both Lee and Dustin at the same time!

I agree with DAvid – I believe PC Financial supports even greater prepayment (i.e. 20% of the original mortgage amount annually) privileges and increases in periodic payments (25% annually).

Keep what you have but pay down as much as you can and you’ll be ahead (when factoring in the penalty to break your current mortgage).

My bank will allow:
- up to 10% of the original mortgage amount each year as an extra payment.
- increase the monthly payment amount by 10% each year.
- accelerating the mortgage by paying weekly or bi-weekly instead of monthly (sneaks in one extra payment per year)
- doubling each payment.

Thus on a $250,000 mortgage amortized over 25 years, you would pay it off in about 4 years by taking the steps above, even with your current interest rate. As your term becomes shorter, the interest rate charged becomes less important, as there are fewer compounding periods. See dinkytown,net for useful calculators to aid in these calculations

You should also determine the penalty for early termination of you current mortgage. Usually its 3 months interest or about $3200 in your case, though this could differ between institutions.

If, after doing this research, you would be better served by switching, talk to your banker….

DAvid

My wife and I are currently in the second year a 5-year fixed mortgage (at 5.15% with PCFinancial). Our outstanding balance is about 250,000. Given the current lower interest rates, combined with a much higher collective income than when we took out the mortgage, I am considering our options for paying down our mortgage as fast as possible.

We don’t have any other debt and our monthly expenses are low, so when I do the M1 or Canadian Tire calculations, it looks like switching to one of these products may allow us to pay down the mortgage in less than 3 years. In our case it seems like these “one and only” accounts make sense, as they do not appear to have the pre-payment restrictions or minimum amortization periods of traditional mortgages(?)

I guess our other alternative is to try to renegotiate with PC for a variable mortgage with more flexile prepayment (if this is possible). I understand that there is a difference in interest cost between a variable mortgage and these all-in-one products, but it seems as though the flexability would outweigh the negatives in our case. I am not sure if there is something I am missing here – any thoughts?

Thanks very much for any help you can provide.

My husband is a fire fighter with a regular salary and also has a construction business pulling in about $20 K extra per year. I work part time and also have a floral business generating an extra $10K or so a year. Right now we both have some write-offs because of having home offices etc. at tax time. If we switch to M1 do we lose those write-offs? Is this because we’re actually living off of the banks money?

If that’s the case….that in combination with the fact that we don’t always save money in any given month…I’m about to be on mat leave so we’ll probably have a year of breaking even, maybe its not the right move.

Our mortgage is up in June – I suppose I should have started thinking about this sooner.

John

Thanks for your reply. As you say, TD HELOC seems to be just a line of credit. When I ask TD what is the difference between their HELOC and M1, they say it is the same, but then they caution me that you may not want to deposit your salary to your account, because they keep the right to close the account at any time, althogh it has never happened before. These and some other uncertainities in their answers make me uncomfortable. Yes theoretically they could be the same if this and that and the other happens, but it seems to be just a line of credit.

My third question is what “all in one” acoount is better and why, for example M1, Canadian Tire One and Only, or RBC Homeline plan or Scotia’s STEP.

To me it seems it is all about their rates and fees, so which one is a better if I want to use an “all in one” account.

Thanks

1) M1 is an all-in-one: chequing, savings, mortgage, LOC, etc
TD HELOC appears to be just a line of credit — you would likely still need a chequing account, etc. in addition.

2) Interest is calculated the same in both instances, though you may flow more money through the M1 by depositing your pay cheques in it.

3) You provide insufficient information on your expectations as to the use of the account to offer advice.

In most instances, the lowest rate is the best option, given you plan to put similar amounts against the mortgage.

DAvid

1) Can anybody consisely and right to the point, withought mentioning any other mortgage types, tell me what is the difference between M1 all in one account and a HELOC like TD Home Equity Line of Credit?

2) Is the interest rate calculated daily on the balance owed at the end of each day for these two?

3) In your opinion should I go with M1 or TD HELOC or other and why?

Regards

Confused afetr reading this blog, PhD, finance!

Possibly you should take the advice you offered your cousin?

A look at bank rates for different terms should give some idea of what banks feel interest rates will do in the future. My crystal ball is broken.

DAvid

I am now telling him to lock in all or some of his mortgage at Manulife’s posted 5-yr term of 4.45%. With the M1 rate at 3.5% anyway, it’s really not a huge difference. Over the next 5 yrs, I would doubt that the M1 rate would average below 4.45% as interest rates only have to rise 1% to make locking in a wise decision.

As for me, come September, I will have to look at all my options… anyone have any thoughts on fixed or variable for later this yr (ie: what will rates do over next few yrs)??

Adam

DAvid