Quote:
Originally Posted by Slava
Yes, and the short term interest rate issue is a concern. There are a couple of things to note though. One is that its short-term; the rates are historically low and while it might take sometime they will increase as inflation becomes a concern. As rates increase that means that you'll see HELOC rates move more to something closer. $2250 over the course of a mortgage is basically nothing.
The other point to note is how the interest is calculated. For Manulie One its on the daily balance. So if you get a lump sum today and put it in your account it goes directly against the principal, and interest is calculated that day. A mortgage doesn't allow for that; sure you could be in a position where you put money in today and spend it all, but frankly you have more problems that your interest rate if that is your situation on a consistent basis!
|
I think its safe to say most people would agree that $2,250 over a year is significant. This difference will drop as the mortgage is paid off, but in the early life of a mortgage, the difference in interest rates is quite a large cost.
Another point of note on the fact that interest is calculated daily is the fact that it is compounded monthly. A conventional mortgage is compounded semi-annually. You are therefore paying more interest on interest (if that makes sense). Take this into account and the effective interest rate difference between the two grows even more. Don't forget the $14/month fee.
Here's my biggests problem with Manulife 1. Those who understand the benefits of the account are those who would increase their mortgage payments, pay lump sums, avoid credit card debt, and avoid high interest loans (car loans for example). So the ones that would actually get the account already do the things that the account claims to do and the actual benefit is minimal. And then slap on that higher interest rate.
But that's just me.