Implementation of the Mortgage Interest Savings Program

As  a Financial Advisor, I am always looking for novel solutions to restructure my clients finances; taking into account their immediate and long-term goals, so that they are making the best use of their financial resources. That being said, I strongly feel that financial institutions need to get more creative to entice clients to save more of their money, which will place both the banks and the savers in a better financial position.

TD Canada Trust has recently introduced a savings program called “Simply Save”. This service allows clients to contribute a set amount, ranging between $0.50 to $5.00, to be transferred on a daily, weekly, or biweekly basis into a savings account. And the amount transferred depends on the number of daily transactions the client uses. TD Canada Trust has so far had great success with this program. But I still feel that banks in general can do more to further increase savings by clients, so that they can increase their cash reserves.

I interviewed my immediate manager, who is one of two Manager of Financial Services at the branch of TD Canada Trust that I work at, about his thoughts on allocating a small amount of the interest collected from mortgages payment, and transfer these payments to a high yield savings account. This would provide our clients with extra cash, which they can use to further invest and increase their savings. The immediate benefit of this idea would be less requests for mortgage capitalization’s, which are essentially request to skip the principle payment on a mortgage for a period of time.

After much discussion with my manager, he provided some ways in which this program could be instituted as one of the many lending services we offer. He suggested that for this to become a viable service, a portion of the proceeds from the interest payment transfers be used to invest in long-term investments, so that the bank can maintain a healthy level of reserves in case of future financial turmoil. Furthermore, a condition would have to be put in place whereby posted mortgage interest rates would have to be applied to their mortgage, so that the cost of contributing a portion of their mortgage interest payment can be offset.

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