Manulife One Review
Here is my humble review of our Manulife One account. I do not claim to know about all the different types of mortgages and accounts out there or pretend to have an idea of how it would work in your situation. I can only attest to how it has worked for us over the last year and a half that we've been working with it and perhaps this will help you make an informed decision as to whether or not it is the right type of product for you.
I had seen the Manulife One commercials a few years back and looked into the M1 a bit but at that point we were new homeowners and didn't have enough equity in our home to take advantage. As time went on and we paid down more of our mortgage as the value of our home rose, I looked into it again. This time I inquired about it on the website and an advisor offered to come meet with us. I still didn't think we'd qualify and I was somewhat wary to look into it because I was embarrassed about the amount of debt we still had, even after paying a large chunk of it down!
The M1 advisor actually informed us that we looked like good candidates for the account and explained how it all worked. I had done a lot of research prior to the meeting so I didn't have a lot of questions. The main drawback the I was able to find in my research is that this account has a $14 monthly fee. I'm not ecstatic about the fee but using the account has saved us enough money in other ways to justify the monthly fee. Perhaps once there is more competition in this market Manulife will decide to drop the fee. (hint, hint)
The advisor arranged to have our home appraised. I was worried about this since a few areas in our home were under renovation at the time but no one actually came to the home to do this. Rather, they assessed the amounts that other homes in the area were selling for and valued our home that way. I suppose this could work in your favour or against it... Manulife will lend you up to 80% of the assessed value of your home. This was excellent for us as we had bought a fixer upper in our neighbourhood and sunk a bit of money into fixing it up. The Manulife One account allowed us to roll the amount spent on renovations back into the 'mortgage' which worked well in our situation.
Once we were approved and all the paperwork went through, we were able to log onto our account online and see 2 amounts: the amount that we owed and the amount that was available to us. The amount available to us is 80% of the assessed value of our home less the amount that we owe on our home. (ie; if your home is assessed at $200,000 and you owe $150,000 on your home it will show that there is $10,000 available for you to spend). We used the money available to us to pay down our remaining (interest bearing) debt. This included some small balances on credit cards, a little bit of a car loan and our line of credit.
I was embarrassed to talk about our new 'mortgage' at first because it felt like we had cheated. In one foul swoop we had taken all of our high interest debt and were now only paying 3.5% on it. We didn't have to worry about making separate small payments against all of our debts; we now only had one focus- to pay down our mortgage.
I was also very aware of the risk that we would just rack up all of our credit cards again and I was afraid that people would judge us saying that we would just go and run up even more debt. In fact, this is the main reason that I would warn people to stay away from this type of account. In our case though, I was fairly confident in our new found money skills and felt that we had spent enough time changing the bad habits that put us in debt in the first place as well as paying them off little by little.
The main issue that I have run into since switching over to the Manulife One account is that it has required significant changes in the way that I budget, save and spend my money. Before, money would come in and I would pay bills, pay off debt and put my savings into other accounts and know that I could spend whatever was left on groceries and gas etc. I had designated savings accounts for vacations, cars or whatever else we needed to save up for and it was very easy to see how much money I had for what at any given time. Now, there is no sense in keeping my vacation savings fund, or emergency fund for that matter, in a separate savings account that would get me 2% interest at best when I am paying 3.5% by not keeping that money in my M1 account.
I slowly got back to the way I used to keep track of my money when I was a kid: ledgers. I have a binder with a whole bunch of different ledgers that keep track of where every dollar that is available to me in my M1 account is designated. My emergency fund is kept in my M1 account along with any money saved up for our next vehicle, money saved up for clothing and our personal spending accounts. While I pay bills as soon as they come in the mail (or e-mail), I post-date the transactions so the money doesn't leave my account until it absolutely has to. We also use our credit card for everything to get an extra 30 days of interest free money.
Once I was able to get my mind around how to use this account and budget properly, we felt so much freedom and flexibility! Essentially, we are our own bank. We shouldn't have to apply for a car loan ever again. When we decide to invest in real estate, we can choose to leverage our own home to make it happen. If we see a great deal on something, for the most part, we can choose to take advantage of it because we can 'borrow' from ourselves. Obviously, if we 'borrowed' from ourselves continually without paying ourselves back we would be in big trouble but that is where it is incredibly important to make sure that you have a good handle on your budget and refer back to your ledgers constantly!
Overall, it can be overwhelming to log in to your bank account and see a 6 figure negative number. It can be equally misleading to log in and see a great big number in the available funds category. If there is one thing that I would say to anyone considering the Manulife One account, it is to make sure that they have some solid practice when it comes to living within their means prior to attempting to make this account work for them. Our advisor said it best when he told us, 'The key to this account is that, if you drove a Ford before you got it, you still have to drive a Ford after. If you go out and buy a BMW it isn't going to work for you.' It has been a wonderful tool for us in paying down our debt and giving us flexibility but, like any tool, it has to be used properly to get the intended results.