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

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.

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

Question to Ed – Do you provide services to people living in the western Canada?

Thanks

Separately, it seems that the quality of information offered by lender reps appears to be getting a bit less reliable these days. We’ve noted this in the following article that is appropriate to this discussion:

Story Link

You are right. Our client at National confirmed it as well. Nothing has changed there. The All-In-One is not a readvanceable MORTGAGE. It is only 2 credit lines that are readvanceable.

This of course means you are paying much higher interest (prime), instead of a lower mortgage rate. Prime -.85% is easy to get and .85% interest on most mortgages is a lot of money. Less interest also means more SM investment.

You can have a conventional mortgage with it, as FB says, but that mortgage is again not readvanceable.

We would not consider it for the SM.

Ed

I think the issue may be that your client had a mortgage and a mortgage cannot be linked to the “all in one”. If they were using a line of credit as their mortgage then a readvance happens automatically.

I have heard that the National Bank plans to change the AIO so that a typical mortgage product can be linked. Until then it is just a multiple line of credit account.

You’re right in that Bank reps do sometimes get it wrong. In this case, we contacted two different BDM’s at National Bank to confirm it.

If you’d like, shoot me an email and I can reply with their names and contact information.

Have a great evening,
Melanie

It is surprising how often what bank mortgage reps say turns out not to be true.

We have a client with a National Bank All-in-One that had it set up by a mortgage broker before meeting with us. The broker and the branch mortgage rep at National Bank both assured him it was readvanceable, but when he tried it, the $10,000 minimum applied.

This essentially meant he was unable to do the full SM until he could get out of his mortgage. We have a variety of ways to fake the SM with results not much lower, so we were able to work around it.

This was more than a year ago, so perhaps they have improved the product, but our National Bank rep tells us the product is the same. We’ll check into it.

This situation ended up being much worse. The client had signed for 1 year, but the mortgage broker subsequently changed it to 5 years and left him stuck with his All-in-One unable to do the full SM for 5 years.

I hope you are right, Melanie, so we’ll talk to our client and see if he can set it up to be able to readvance now. However, until we have it confirmed, we still don’t consider the National Bank All-in-One to be a readvaceable mortgage for the SM.

Ed

National Bank’s All-in-One product lets you open multiple sub accounts. If you wanted to, you could put your “mortgage” in one sub account and use a 2nd sub account to borrow money to fund investments.

As long as the LOC sub-account(s) are set to a “variable limit” National Bank can automatically re-advance funds from one sub account to the other as the first is paid down.

There is no $5000 or $10,000 minimum re-advance between sub-acounts but there is a $5000 minimum that applies to refinancing and increasing the client’s TOTAL credit limit.

The above comes from National Bank’s Business Development Manager. Hope it helps!

Melanie

I wouldn’t use any of these mortgages. You essentially just have 2 credit lines – not a readvanceable mortgage.

The National Bank All-In-One (and the IG version) do not automatically readvance. As you pay down a mortgage (or even just one credit line), you do not automatically gain credit in your investment credit line.

There is a minimum readvance (either $5,000 or $10,000) and you have to go in and sign to get it. So, you cannot reborrow the principal from your mortgage payment each month. You would have to wait a year or 2 until you have paid down the minimum $10,000.

On top of that, you are paying thousands extra because your mortgage is at prime, when you can get a mortgage far below prime (as you mentioned).

The All-In-One is only slightly better than just getting 2 unrelated credit lines – one for your mortgage and one for investment.

I would not even put it in the category of readvanceable mortgages until they eliminate the minimum readvance and make it automatic.

Several banks have real readvanceable mortgages. Why would you pay thousands of dollars in higher interest and not even get a readvanceable mortgage?

Ed

Great post! I called NBC again to research the differences in what we were told. This time I spoke with one of their business development people (last time I spoke with a broker rep). Here’s the updated feature list based on what he confirmed:

Available through: National Bank (I am keeping NBC’s version separate from other institutions’ products because there are slight differences)

Maximum Loan-to-Value: Up to 90% if insured (75% without insurance/80% starting in September).

Minimum Credit Score: 670 (confirmed)

Maximum Loan Amount: $500,000 for stated income; unlimited otherwise.

Available Mortgage Terms: Unless you go with the high ratio option (i.e. 90%) there is no term so to speak. It’s fully open and–as you note—basically a line of credit. If you choose the high ratio option the term is 5 or 10 years.

Mortgage Interest Type: Variable

Appraisal, re-advance or other monthly fees: Appraisal fees and $2.50 monthly for each sub account after the first one

LOC Interest Compounding Frequency: Daily

Pre-payment privileges: Up to 100% anytime.

LOC is callable any time: Only upon default.

Automatic LOC Increase After Principle Payments: Yes. The LOC sub-account automatically increases when the “mortgage” sub account is paid down. The LOC is fixed as you noted so a new appraisal is necessary to increase it.

Must re-apply to Increase LOC after Principle Payments: No

Home can be reappraised during term to increase LOC: Yes. New application required plus legal fees.

Maximum Credit Lines: 5+.

Automatic Investing from LOC: No. However, this is a matter of semantics. You can use pre-authorized debits as you note. There is no automatic “push” of funds into your investments each month, however. That part must still be manual–at least for NBC’s version.

Portable to another House: As you note the All-in-one must be closed and you must reapply.

We’ll keep honing all the comparisons until hey’re right on. This is a tremendous amount of data so it may take a few iterations.

By the way, I’m still waiting for TD and IG to confirm a few details on their products.

Have a wonderful day,
Melanie

P.S. ING has a new Smith Manoeuvre mortgage due out soon as well!

Mike

I have started a small blog where I will go over every step of my implementaion of the Smith Manoeuvre. danmorel.wordpress.com

Cheers,
FB.