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ppsearchrsearchn %E6%B5%B4%E8%A1%80%E6%88%B0%E5%A3%ABwiki ht Www t Www eBelow is a table based on a $250,000 $200,000, 25 year mortgage created by our resident calculator guru, Cannon Fodder:
| Mortgage Type (based on 25 yr mortgage) |
Interest Rate | Monthly Payments |
Total Debt Paid | Additional Cost |
| Semi-Annual Compounding | 4.75% | $1,418.64 | $425,591 | — |
| Monthly Compounding | 4.75% | $1,425.29 | $427,589 | $1,998 |
| Manulife M1 | 4.75% | $1,438.39 | $431,518 | $5,927 |
| Manulife M1 w/payment at end of month | 4.75% | $1,443.95 | $433,187 | $7,596 |
| Semi-Annual Compounding | 5.75% | $1,562.56 | $468,765 | — |
| Monthly Compounding | 5.75% | $1,572.77 | $471,828 | $3,063 |
| Manulife M1 | 5.75% | $1,581.48 | $474,444 | $5,679 |
| Manulife M1 w/payment at end of month | 5.75% | $1,588.89 | $476,666 | $7,901 |
| Semi-Annual Compounding (prime – 0.90%) | 3.85% | $1,294.80 | $388,441 | — |
| Monthly Compounding (Canadian Tire FS) | 3.85% | $1,298.97 | $389,693 | $1,252 |
| Manulife M1 | 4.75% | $1,438.39 | $431,518 | $43,077 |
| Manulife M1 w/payment at end of month | 4.75% | $1,443.95 | $433,187 | $44,746 |
Here are a couple of key points about the table above, the M1 calculations include the monthly fee of $14/month (free for professionals). The last few rows are what’s really significant in terms of cost difference between a discounted variable rate vs the Manulife One mortgage. You’ll notice that for a $250,000 25 yr mortgage @ todays rates, you’d end up paying over $43,000 more for the M1 mortgage over a traditional discounted variable.
My opinion is that if you want the convenience of having a HELOC but want the best bang for your buck, then consider going with a discounted variable readvanceable mortgage. That way, you’ll get the best variable price for the installment portion along with a growing HELOC to use as you please.
Any thoughts?
1. The Reverend
Disclaimer: I’m a Manulife employee and have an MOne
I find the table somewhat misleading. I agree that lower interest rate = lower interest paid, but what I disagree with is the apples to apples comparison of a HELOC and MOne.
The cashflow throughout the month argument really only covers the monthly fee, but what can really get you ahead with MOne is that since it contains all your savings, any excess money you have at the end of the month continues to pay down your mortgage. Sure if you have an extra 10 grand in your chequing/savings account, you’d for sure look at transferring it to your HELOC, but its the 5 bucks here, 100 bucks there that add up quickly in the MOne, which people probably don’t transfer to pay down their HELOC balance.
I absolutely understand the arguments and if a HELOC was used perfectly (ie keep $0 in chequing until day its needed) it becomes far superior but it never happens that way.
I’d be interested in seeing some of the calculations behind the figures above if they are easily available in spreadsheet. Also, what are these “monthly payment” amounts. There are no monthly payments with MOne.
May 22nd, 2008 @ 9:06 am
2.
The Reverend, you have some very valid points. However, discipline works two ways. Yes, it takes discipline to pay down a regular mortgage but it also takes discipline to control spending under the M1 as there is a huge balance available which is also your spending account.
May 22nd, 2008 @ 10:18 am
5. paul s
This is a great topic. It is impossible to do a real apples to apples comparison as FT attempts to do. The products and how they are used is completely different. What has been missed in the comparison is the impact of direct deposits during the month since interest in M1 is calculated daily. I would encourage FT to go to the website and run their calculation with a few senarios and see what happens.
If you don’t like the $14 fee from M1, but like the concept, maybe the Canadian Tire option might look interesting to you.
May 22nd, 2008 @ 10:28 am
6. Jadium
Long time reader…first time writer…
I love the blog, it has single handedly created my interest in personal finance over the past half a year! Disclaimer – I am an Engineering grad student – soon to be teacher with no expertise or affiliation to the personal finance industry…
I have been researching the best mortgages to implement the Smith Manoeuvre for a the last couple months. I have not completely made up my mind yet (still have about 6 months before closing) but I think one of the better products out there at the moment is the National One All in One mortgage. Canadian mortgage trends has a great review of the product at canadian_mortgage_trends/2008/04/all-in-one-redo.html
I like the blend of an MOne account with the option of locking in your mortgage at a reduced variable rate.
May 22nd, 2008 @ 10:31 am