Manulife One – Borrower be aware or beware?

The Manulife One line of credit is one of Canada’s best marketed ” all in one products”.  Feel free to review my previous post here about the merits or lack there of when it comes to the Home Equity line of credit as a home financing strategy.  I want to instead address the potential dangers of a very slick and well marketed product and some things that you might not be aware of.

Have you every purchased something only to find out when it really mattered that it was not quite as good as represented?

This happened to me in the spring, while I was vacationing in Florida my gall bladder decided that it was time to be removed.  Fortunately I purchased in advance travel medical insurance and (I thought) it would be taken care of quickly and covered by my insurance.  As I was laying in my hospital bed in a semi drug induced state I read the fine print on my policy and realized that as long as I am stable the insurance company reserves the right to fly me back to Canada for treatment.  This means that they are able to postpone any procedure until which time my safety was in jeopardy.  Long and short my gall bladder surgery, which is traditionally a day surgery, turned into five days in the hospital and it ultimately being taken out in Florida as the insurance company scrambled unsuccessfully to fly me back to Canada to have the procedure done.

How this is relevant to the Manulife One?

For starters please read my previous post regarding the dramatic increase in cost that many clients experience by choosing an all in one product.  Secondly, a more minor point would be the monthly cost of $14 for Manulife to administer the account for you.  Lets recap so far; you are being charged significantly more interest for your total amount owing that you would be on a comparable mortgage, and now the Manulife One is charging you $168 per year for the convenience of borrowing from them.  However the one part of “small print” that I find the most frightening is that your rate is based upon Manulife’s base rate which according to Manulifeone.ca is” The Manulife One Base Rate is set independently of Manulife Bank’s Prime lending rate, and may change without notice”.  In plain english, this is a rate set by Manulife and, depending upon their book of business and profit margins does not have to change when the Bank of Canada lowers its rate.  Essentially once you are a Manulife one customer you are depending upon the good graces of Manulife to honor the standard that its competitors are held to.

What is the alternative?

The primary competitor for the Manulife One is National Bank’s All in One product.  This is a true banking product with NO monthly fees and the rate changes with the prime rate so you are ensured an honest representation of your true borrowing costs.

The underlying moral of the story is if the bank makes it seem too easy and too slick please take a look “behind the curtain” and make sure you are fully aware of your choices and potential future downfalls.