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Manulife’s New BFS M1

Manulife Bank is fast becoming an essential broker lender thanks to its competitive rates and balance sheet products.

Those products should be in high demand this coming year, especially given National Bank’s exit from the channel. That includes its most recent rollout announced last week, the Manulife One for Small Business Owners.

This product’s hallmark is flexibility. Well-qualified BFS (business for self) clients can qualify with TDS ratios up to 69%.

Moreover, for clients meeting the following criteria, TDS can exceed 70% if:

  • Their net worth is at least 2 times the loan amount
  • Their liquid assets are at least 1.2 times the loan amount (excluding the subject property)

In exchange for these looser qualifications:

  • The maximum loan-to-value is 65% instead of 80%, with 50% maximum for the revolving LOC
  • The LOC rate is a bit higher (prime + 0.70% instead of prime + 0.50%)
  • The rate on the optional 5-year fixed sub-account is about 40 bps higher

Other benefits:

  • There is no rate surcharge for refinances
  • The LOC’s minimum interest payment can be capitalized (i.e., made by the LOC itself)
  • Maximum amortization on the fixed-rate sub account is 30 years
  • The 5-year fixed portion is qualified at the contract rate, not the much higher BoC benchmark.

Keep in mind:

  • The client’s net business income is verified using an NOA and T1 General
  • Applicants must be in business 2+ years to qualify under this program
  • The revolving account is qualified using the BoC’s benchmark rate
  • Maximum loan amount is $1 million
  • The property must be owner-occupied
  • The product is not available in Quebec at this time
  • A $14 monthly fee applies for the M1 ($7 for those aged 60+). It includes comprehensive e-banking.

All in all, the M1, SBO edition, is a strong option for business owners who write down much of their income and need some qualification leeway. It gives them the liquidity they need to grow their businesses, and an interest-offset LOC account to minimize their day-to-day interest cost.

In 2017, Manulife’s mortgage lineup will see even more additions, namely a rental and conventional mortgage. (Its only conventional product currently in the broker channel is the M1.)

With the government’s botched insurance rule changes last month, brokers (and consumers) need all the competitive refinance and rental products they can get.