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… :-(

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.

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?

Good luck with your endeavor!

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?

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?

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

Mike d.

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.

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.

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

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.

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.

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.

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.