If keeping your various loans, lines of credit, bank accounts and a mortgage in order is becoming a herculean task, some Canadian financial institutions are touting a simple solution.
So-called all-in-one mortgages, sometimes referred to as all-in-one lines of credit, combine all your financial obligations into one chequing account.
Websites for some of the banks offering an all-in-one mortgage tout its potential advantages.
National Bank of Canada says an all-in-one account lets you automatically access the repaid portion of the principal, it can reduce the service fees associated with having numerous bank accounts, and it can reduce the interest rates you pay compared with many loans.
“Having the maximum flexibility to manage debt responsibly is increasingly important, for people with debt or people without debt.” – Rick Lunny, Manulife Bank president & CEO
Investors Group Inc. says as you deposit paycheques or other income into your account, it instantly reduces your debt, and thus the interest paid on it. But when funds are needed to pay bills, you can access funds from that same account up to your limit.
Manulife Bank, which brought the all-in-one concept to Canada from Australia where it had proven to be popular, calls its version Manulife One.
Rick Lunny, president and CEO of Manulife Bank, says Manulife One is an all-in-one mortgage, line of credit, chequing and savings account that simplifies banking and life.
“It is one easy-to-manage account and there is no need to transfer funds between multiple accounts,” said Lunny. “With Manulife One, deposits automatically offset against the value of your mortgage. This means you only pay interest on your mortgage balance minus your savings balance, which enables customers the opportunity to become debt-free sooner.”
He says having better financial flexibility allows a person to quickly adjust to unexpected costs, making the all-in-one account the kind of personalized banking option that many people are looking for.
“Having the maximum flexibility to manage debt responsibly is increasingly important, for people with debt or people without debt,” he said.
However, some financial advisers caution that people considering an all-in-one mortgage must be use sound judgement and not view it as an easy line of credit.
They say people should also keep in mind the need to pay down the underlying loan, and not look at just the monthly interest payments as a guide for their spending habits.
At the end of the day, Lunny says since everyone’s situation is unique, people should connect with their financial adviser to decide which financial product makes the most sense for them.