manulife review

I’ve been looking into using the Smith Manoeuvre strategy, I’ve come across a few mortgage solutions that will fit nicely. Among them include the RBC Homeline mortgage, the First Line Matrix mortgage, and the Manulife ONE (M1) mortgage. The first two mortgages are similar where they have a traditional mortgage portion with a home equity line of credit (HELOC) portion attached to it which increases the credit limit as the mortgage gets paid down. The M1 mortgage, on the other hand, works a bit differently.

How does the M1 mortgage work?

The M1 mortgage operates like a giant secured line of credit and checking account combined into one. Within the M1 mortgage holds ALL of your debts, including your mortgage, car loans etc. The twist that M1 offers is that you deposit ALL of your INCOME into the M1 account so that any savings at the end of the month works against the DEBT instead of just sitting in your stagnant checking account.
Try the Online Calculator:

With the extra money left over every month working against the debt, the theory is that your debt will get paid off faster. The M1 website has a calculator that predicts how many years you can shave off your mortgage by using their product.
I tried the scenario with a $200k home and a $150k mortgage due to be paid off in 21 years. If I were to switch to M1 and apply my $25k in savings against the debt, I could have the mortgage paid off in approximately 9 years. Not bad hey? I’ll bet this could be accelerated even more if you applied the Smith Manoeuvre principles (pay down mortgage with tax deductions).
Advantages:

Depending on your situation, the mortgage and other debt will inevitably be paid off faster if you can use every extra dollar towards your mortgage.
Drawbacks:

Rates are fixed at prime with no discount. You can find a variable mortgage that is more competitive at prime – 0.85. On top of that, since M1 is a giant line of credit, interest is compounded MONTHLY, and not semi annually like conventional mortgages. This makes the gap even bigger between M1 rates and conventional rates.
Every day spending is withdrawn from a non tax deductible line of credit.
$14 monthly fee. (really don’t like this)
Lack of M1 bank machines/tellers.
Who should use this?

People who have money left over at the end of the month after all bills are paid. You’re debt will most likely be paid down faster than a conventional mortgage.
People looking for a viable mortgage solution to use with the Smith Manoeuvre.
How would you use this with the Smith Manoeuvre?

You can create multiple accounts under the M1 plan. If you wanted to start investing using the Smith Manoeuvre with the borrowed money in M1, you can set up a separate account for this to help keep track of the paper trail.
I’m not sure if this is possible, but ideally, as you pay down the non-deductible mortgage, you would want your “separate” SM account to grow automatically.
Conclusions

With the rates being higher than conventional mortgages along with the $14 monthly fee (I’m frugal), I don’t think that this product is right for me.
I think that with discipline, you could pay down a lower rate conventional mortgage quicker than M1 and with no fee.
This mortgage ends up reducing the pay back period because it applies all of your savings against the mortgage. This will work with ANY mortgage (if you have the discipline). Why not get the RBC Homeline mortgage with lower rates and apply all your savings against that non-deductible mortgage. You’ll get the increased credit limit automatically on the HELOC side. This would act just like the M1 mortgage BUT with lower overall fees and interest.
Need more info?

I have written another article regarding the Manulife ONE mortgage which includes an analysis of the overall cost in the long term. Check out our Manulife ONE calculations, it’s a real eye opener.

The Manulife One website is also full of info, you can check it out here.