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Canadian Mortgage News Daily — April 13, 2021

Here’s a daily helping of Canada’s latest mortgage news (the italics are the Spy’s 2 cents):

  • Want to cool the housing market? Force banks to shoulder more risk (The Globe and Mail)
    • A simplistic view that: (A) refuses to acknowledge how strictly regulated lenders already are, (B) ignores most meaningful mortgage risk metrics, and (C) doesn’t do a bloody thing to address the biggest cause of nosebleed prices: supply imbalances.


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  • Chris says:

    Not a comment, so much as a question. I have recently seen advertisements for products like the Manulife One account. The concept seems to be to have One account that is also your mortgage. As you have income, it goes against the mortgage principle and when you spend it just adds to the principle. Seems to make sense, then if you get a lump of money, your principle goes down, need more, your principle goes up! Good discipline should pay off the mortgage faster.

    Any comments on that type of product?

    • The Spy says:

      Hey Chris,

      I love this product if used the right way (and if the borrower can save each month after all expenses). Although I think the savings claims are a bit overstretched for a good percentage of M1 users.

      What I love about it:

      1) you save interest as your income offsets living expenses
      2) it’s great for leveraged investing (because LOC sub-accounts can be firewalled from other borrowing, making tax tracking easier)
      3) Manulife is one of few banks with fair prepayment penalties
      4) it’s a great reverse mortgage alternative (especially if set up prior to retirement)

      What I don’t love about it:

      1) the LOC and mortgage rates are above market
      2) you can’t get a discounted variable rate inside the M1.

      Some people also dislike the $16.95 monthly fee but the overall interest savings overshadows that.

      The most important tip I have for people who get an M1 is this. Don’t get it if you’re not a saver. The best way to use it is to pay down debt in the LOC portion and then periodically make a prepayment on the mortgage portion (using LOC funds). That moves borrowing from the mortgage portion to the LOC portion (so your deposits — like your paycheque — can start offsetting the debt).

      It’s a product that really requires active management to use effectively.

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