All-in-One Redone

National-Bank National Bank has just re-launched their All-in-One mortgage and it’s better than ever.

For those who aren’t familiar with it, the All-in-One combines checking, savings, and a mortgage all in one integrated account.  This lets clients offset any debt in that account with incoming deposits–thus saving interest.

Here’s an example of how it works.

Suppose you deposit your regular paycheck into your All-in-One account.  For the time that money sits there, it cancels out an equal amount of debt in the same account.  Because your principle owing decreases, you therefore borrow less and pay less interest.

Since the All-in-One calculates interest daily, you save interest even if the incoming money stays in your account only for a few days.

All-in-One

The All-in-One has been a highly anticipated product for two big reasons.  First, it’s the only product we know of that allows a discounted variable rate mortgage in conjunction with an all-in-one-type account.  (More on this below)

Second, it’s the only fully readvanceable mortgage in Canada that: a)  has a good discounted variable rate; and, b) is available through mortgage planners. Ever since Merix raised the variable rates on their HELOC, mortgage planners have met stiff competition from BMO and others offering readvanceable mortgages with low variable rates.

In any case, that’s now all changed.  Moreover, there’s a lot more to like about the National Bank’s new All-in-One besides a good rate.  For example:

  • Principle payments are now fully readvanceable, even if you lock in a portion of your borrowing at a discounted fixed or variable rate. For every $1 of principle you pay off, your line of credit (LOC) limit now goes up $1 automatically.
  • The All-in-One allows interest-only payments on the LOC portion. That can come in handy if cash gets tight.
  • There is no minimum amount that you need to readvance.
  • According to National Bank, readvancing is immediate.  If you’re using the LOC for investing, that saves 2-3 days of waiting for the readvance to complete–which is often the case with certain competing products.
  • The LOC portion is fully open (even if you hold your mortgage in it)
  • You can have up to 99 sub-accounts in the LOC.  Ninety nine may be overkill but multiple sub-accounts are nonetheless handy for separating personal borrowing from investing or cash damming.
  • The All-in-One lets you borrow up to 90% of the value of your home (95% loan-to-value is coming in May)
  • You get one simple checking, savings, and mortgage statement.
  • You can access funds in your sub accounts via:  cheques, automated banking machines (ABMs), branch withdrawals, online banking, and Interac direct payment.
  • Customers get several free banking services including: unlimited Interac, debit, phone and web banking plus use of National Bank, HSBC, Canadian Tire and Credit Union ABM’s at no cost.

On the “cons” side, there are also three limitations that we can see:

  1. The All-in-One has two borrowing options:  a) the open LOC portion; and, b) the closed locked-in portions. Locked-in portions unfortunately do not get “all-in-one” treatment.  In other words, if you lock in your mortgage at a discounted interest rate, you can’t offset the principle on that debt with your incoming deposits.  If you want the benefit of offsetting the principle on your mortgage, your mortgage has to be placed in the LOC portion.  The LOC portion is always at prime rate, however–or 5.25% as of today.  (Note: We’ll compare the benefits of the each “portion” in an upcoming story)
  2. You generally can’t switch into a readvanceable mortgage like this without paying legal and appraisal fees (exceptions sometimes apply–contact a mortgage planner for details)
  3. Additional sub accounts are $2.50 a month. The first is free.  (This isn’t really a negative because most banks charge $10 a month for all the freebies you get with NBC sub-accounts.)

All told, the All-in-One is one of the most powerful and flexible mortgage products on the market.  It’s an excellent choice for anyone that can make use a growing cash reserve.  This includes the self-employed, rental property owners, investors, and homeowners needing a ready source of low-cost funds.

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