# Does a Manulife One -type account make sense for me?



## BrianV (Jun 1, 2015)

So, I've been debating getting my financial house into somewhat better order, and I am hoping for some feedback on my main plan:

First off, I am a 29-year old self-employed (sole proprietor) software developer. Being self-employed, it means that over the course of a year I accumulate a lot of 'untouchable' money that I need to save for GST remittance and income tax every year.

So, for example, I am currently sitting on about $28k that I can't do much with because it needs to go to the government soon, and is just sitting in a 1.05% savings account losing value to inflation.

My house is currently valued at ~$210K, and I have a 2.99% mortage on it with $115K to go that will reach the end of it's term in February. In addition, we have about $20k of student loans (part at 3.85% and part at 5.25%) and $6k on a vehicle loan at 5.99%. We don't carry any credit card debt.

Manulife One is currently at a 3.35% Base Rate, so it's higher than my mortage, but much lower than my other debt. The main benefit I see is that as I work through my employment year and begin to set aside income for tax time, that currently-stale income would be working against my mortgage - essentially working for me at 3.35% rather than languishing at 1.05%.

The penalty for leaving my current mortage is the higher of three months of interest payments (~$900) or the Interest Rate Differential Amount, which is the difference between the current interest rate (2.99%) and 'today's interest rate for a replacement mortgage, calculated on the time remaining on your existing Mortage term.'. This amount is then applied against our principal balance for the remainder of our term. My assumption is that any rates they offer today are higher than prime + 0.10%, and so it would be the $900 penalty.

I've recently set up a TFSA at Tangerine, where I plan to start saving for my retirement in ~35-40 years. I'm starting an automatic savings program putting a yet-TBD amount into the Tangerine Equity Growth Fund with the intent to grow my saving percentage to ~15% over the next two years as my debt gets caught up.

Any feedback? Would moving to Manulife be stupid? I like the idea of having access to my home equity, and I like the fact on knowing that every dollar I spend is essentially 'borrowed' at 3.35% - and each dollar not spent is helping the mortage. It seems like a powerful mental saving incentive.


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## 307169 (May 24, 2015)

It depends on the amount of "untouchable cash" you have. Otherwise, you can always have a high interest saving account to store those cash.


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## BrianV (Jun 1, 2015)

*mother earth*



Johnny_kar said:


> It depends on the amount of "untouchable cash" you have. Otherwise, you can always have a high interest saving account to store those cash.


Well, as I said above, roughly $30k by the end of each year... which could be (temporarily) reducing my mortgage by 25+%, thus reducing the amount of interest it's garnering by 25% for that time.

As for high interest savings, I suppose I can get a 1.95% account from AcceleRate... but that's still barely keeping up with inflation, and would still lagging what it could be doing with the Manulife One.


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## LBCfan (Jan 13, 2011)

BrianV said:


> ..................
> Manulife One is currently at a 3.35% Base Rate, so it's higher than my mortage, but much lower than my other debt.


What is Manulife One, a GIC, debt instrument or life insurance policy? I'm not going to look, but maybe you should have included that info. Not to be a spelling Nazi, but how do you misspel some financial words.

Oh, misspelling deliberate


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## BrianV (Jun 1, 2015)

LBCfan said:


> What is Manulife One, a GIC, debt instrument or life insurance policy? I'm not going to look, but maybe you should have included that info. Not to be a spelling Nazi, but how do you misspel some financial words.
> 
> Oh, misspelling deliberate


It's similar in concept to a HELOC, except intended as a replacement for a normal bank account, with cheques, debit, etc. It's secured against your house, and has a limit of 85% of the value of your house. However, the 'trick' with it is that every extra dollar you have in it works against your *mortgage* (spelled correctly this time). Interest is calculated daily based on your closing balance. It also gives you the ability to easily consolidate all your higher debt into a single low-interest account.

So, when you gas up your car, it's coming out of your home equity. On the flip side, the second you deposit your paycheque, it's increasing your equity. Rather than calculating against prime, they have their own 'base rate' that is in no way related to prime.

As far as criticising me on a spelling mistake... really? :neglected:


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## LBCfan (Jan 13, 2011)

BrianV said:


> As far as criticising me on a spelling mistake... really? :neglected:


Here I thought I described myself as a spelling Nazi, or just someone who doesn't want to be one. I won't criticize your spelling in your last post. Remember, when you use written words to interact with others, be it a job application, contract proposal or just a "hi", your intellect will be judged by your spelling. Enjoy.


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## janus10 (Nov 7, 2013)

I haven't tried it, but in the sticky thread in this forum, there is an excel calculator that has Manulife One as one of the comparators. http://canadianmoneyforum.com/files/Loan Comparison calculator V2_0.xls


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## 0xCC (Jan 5, 2012)

I have done some looking into a Manulife One account a number of years ago and I have a friend that moved his mortgage into a Manulife One account when he moved a few years ago.

Ultimately you have to decide whether it makes sense to you (and your personality type) to move into that type of account. Here are a few things that stood out for me when I was looking into it that you might want to consider. These things may have changed since I last looked into the Manulife One so I might not be 100% accurate here.

1. There is a monthly fee of around $12/month from what I remember. That certainly isn't a deal-breaker but it sort of needs to be added into the "interest" calculation.

2. I think you can slice and dice the account almost any way you want. So in your specific case if you know that you are going to have on-average up to an extra $30k every quarter of "untouchable" tax related cash you might be able to leave something around that amount as revolving credit (i.e. at the 3.35% rate and then put the rest of your mortgage into a fixed rate which may or may not be competitive with the 2.99% you are paying now (Manulife should have some table of rates somewhere).

3. You need to have the right personality type (as does your spouse/partner if that applies to you) for this type of product. It is a *lot* of rope and it is not too hard to hang yourself with it if you have a spending type of personality.

4. When I looked into the Manulife One account I didn't really see to many advantages over a typical HELOC. If you have the right personality and are willing to do a little bit of tracking of things on your own you can basically get the same advantages from a HELOC as you can from a Manulife One account without having to pay the monthly fee. If you set up a regular chequing account and a HELOC either with a fixed and a revolving portion or just a revolving portion and keep whatever minimum balance in the chequing account that is required to waive fees. Then you can pay most of your regular bills out of your HELOC, keep the extra "untouchable" money in the HELOC and just leave a little bit of a "slush fund" over and above the chequing account minimum balance to cover things that you can't pay for with a credit card as well as the occasional cash withdrawal. By doing all that you will have accomplished about 90% of what the Manulife One account gives you and you won't have any monthly fees to do it.

I think the main advantage of the Manulife One is the statements/reporting. From the samples I saw back when I was looking into this it seemed like you could get a pretty good breakdown of all the sub-accounts and how much interest is being paid (or earned, a positive balance in a given account also earns you interest I think but at around the typical HISA rate of 1% or so). The other advantage is related to Smith Maneuver stuff, if you are doing that or are interested in doing that. Since everything is reported separately it is fairly easy to keep the investing related loans separate from the personal spending related loans so you can keep the CRA nice and happy.

Anyway, my information on the Manulife One account is a little dated but the bottom line is it can be a good tool for some people although it is possible to get most of the benefits more cheaply with a regular HELOC.


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## CPA Candidate (Dec 15, 2013)

BrianV said:


> As far as criticising me on a spelling mistake... really? :neglected:


Unfortunately the first rule of this forum is post a response that is non-contributory, condescending, irrelevant and critical.


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## LBCfan (Jan 13, 2011)

CPA Candidate said:


> Unfortunately the first rule of this forum is post a response that is non-contributory, condescending, irrelevant and critical.


Well done, Good job. I'm glad you were up to it.


As to the question the OP asked, it depends.

1) Can you qualify for the 3.35% base rate?
2) Have you calculated all the costs (ie. $900, plus the $12/month mentioned above, plus any we don't know about)?
3) Since a LOC of credit doesn't require a (possibly small) repayment of principal every month, do you have the discipline to ensure that you reduce the amount owing every month/year? At least at a rate equal to the principal reductions your loan/mortgage payments would require)? If not, it's probably better just to focus on repaying your debt. 
4) Is 1.05% the best HISA rate you can get?
5) Inflation is irrelevant to any money you are going to have to give the taxman. You will be paying in uninflated $.


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## 0xCC (Jan 5, 2012)

It actually looks like the monthly fee is up to $14/month now unless you are over 60:

http://manulifebankmortgages.ca/manulife-one/rates-and-account-fees/

It also looks like credit balances get 1.25% (scroll down to the Manulife One section on the page): Manulife Rates

One other thing to note is that the 3.35% base rate is currently Prime + 0.5% which should be possible to get at a big 5 (or 6) bank as long as you have reasonable credit history.


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## CalgaryPotato (Mar 7, 2015)

The fees are high on the account. But there are some advantages as opposed to a "do it yourself" HELOC linked to a bank account. Mainly the instant timing. If his money comes in, in large sums, it's instantly up against the mortgage paying right away, and it doesn't draw interest again, until the minute it comes out as a payment. It can be time consuming managing money going back and forth, and keeping track of which payment is coming out when. And you always have to keep a bit extra in the chequing unless you want to risk overdraft.

Then it has the advantage over just keeping the mortgage and using a HISA because like someone else stated, HISA interest is fully taxed but mortgage interest isn't deductible. So even if you get a really good specialty rate from a credit union that creates quite a bit of extra drag.

Generally I don't think Manulife One is the best, but for your unique scenario it really might be. But you'll have to run the numbers because even though that $900 isn't crippling, it's significant enough that it may not be worth it right now for you.


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## mars (Mar 11, 2014)

I have a Manulife One account. I opened it up a few years ago when my mortgage was coming up for renewal. The main reason I opened it was I knew I was being let go from my current employer and I was going to receive two lump sum payments which came out to around 11 months salary. When those hit my account my mortgage was almost paid off so there was very little interest being applied against my account. Since I was also unemployed I did have to increase the amount I owed as I had to live on something but my increases were small in comparison to the payments I had made. Once those big payments were finished and I started a new job, the big benefit I receive is convenience. To help offset the monthly fee I also signed up for an MNBC Mastercard. It pays 1% cash back which I transfer into my account and it offsets the monthly fee. The person who set up the account for me also said if you call and complain they will waive the fee most times, however, you have to call every month. I haven't tried it so I cannot say it works.

It was definitely the right thing for me to do at the time. Eventually I will likely close the account. Without the large lump sum payments or in your case the large cash you are storing, I'm not sure it provides me with a lot of upside value any further.


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