According to a September, 2009 Manulife Bank poll, nearly two-thirds of Canadian homeowners with household debt surveyed say they have never consolidated what they owe. In fact, a third of those homeowners say they only make minimum payments on their mortgages, credits cards and other loans. While the accumulated interest on these debts costs Canadians unnecessary millions, the big banks wouldn’t have it any other way!
By spreading out debts and income across a number of products and accounts, Canadians are missing out on the opportunity to substantially reduce their debts and significantly cut their interest costs.
With a vast suite of traditional lending and savings products, the banks work hard to condition consumers to partition their accounts and subsequently, their debts. Simply, this is how the banks make money- and lots of it.
Save thousands in interest costs and become debt-free faster
With few households making a significant dent in their annual debts, it’s becoming increasingly important for Canadians to find better ways pay off their debts and manage their money. Some are achieving this financial freedom by turning to little-known “flexible" or "all-in-one" mortgages. They work by combining your mortgage with your savings and chequing accounts to reduce overall debt load. Flexible mortgage accounts are widely offered by Financial Institutions in Britain and Australia and have become very popular with their customers.
Here’s How It Works
An all-in-one mortgage brings all banking functions together into one account so that both income and savings can work to reduce debt at an accelerated rate.
For example, after depositing a regular paycheque into this type of account, for the time that money sits there, it cancels out an equal amount of debt in the same account. Because the principle owing decreases, the borrower consequently borrows less and pays less interest.
As this type of mortgage loan calculates interest on a daily basis, interest is saved even if the incoming money stays in the account only for a few days.
Canadians Are Starting To Catch On
In Canada, there are signs that the consolidated mortgage trend is starting to take hold as these types of accounts are now being offered by alternative lenders like Envision Financial in BC, through the Manulife Financial mortgage brokers network and even Canadian Tire Financial Services.
As more flexible mortgage products continue to enter the market place the traditional, structured mortgage products offered by the big banks are becoming less and less appealing to the educated consumer.
In short, Canadians are catching on to the concept of using their mortgage to save thousands of dollars and become debt-free sooner.
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