These things are real, and NOT a scam.
I had one of these for 5 years. Called "Manulife ONE" mortgage.
It is the mortgage / personal banking equivalent of staying "fully invested" in the stock market by using DRIPs.
The interest rate we paid was 0.4% more than a comparable first lien variable 5-yr mortgage rate. The interest rate is variable, but the company was a bit slower to drop the rate when the Fed. rate dropped.... usually mortgage rates will drop within a week of the Fed Rate drop.
We only needed to pay off the interest each month.
We used ONE account as a combined chequing / savings / mortgage account. It worked great, just like an on-line bank account with cheques and everything. Therefore, all of your emergency savings and all of your paycheck are always being put to use against your interest rate.
The US version of this also appears to eliminate a lot of up front mortgage costs.
The catch?
Slightly higher mortgage rate, plus a $14/mo account fee that was waived by also taking a CC from the same bank. (Multiple product discount).
It is banking (pun!) on the fact that people only want to pay off the minimum each month, in this case, pay off the interest, which is essentially auto-deducted. After 5 years, your balance can be IDENTICAL to what you started with.
You typically can't get other HELOCS / Mortgages on your home, because they have signed up for the full equity amount, and then some. (HINT, works great for people wanting a renovation loan, which is why we got one).
Most people save better for short term goals (vacation, car, etc) when they have a separate savings account -- when it is all in "ONE", it is hard to keep the goal in sight. Eventually the company we used started to provide "sub accounts" to allocate savings, " but it was still all the same pool.
One driver for the "Sub account" was to allow people to borrow from the HELOC to invest, and those borrowed funds could be tax deductible, and proven to the tax man.
------------
The advantages.
If you have $10k in a Savings account 1, $3k in savings account 2, and $3k as your average checking account float (which varies from $1k to $5k during the month), and have a 4% interest rate...
Then, with a ONE account or HELOC, you have just put $16k down onto your mortgage, while still having access to it. That $16k for a conventional mortgage is the LAST $16k that you would pay off, If held for 30 years, that $16k at 4% interest and no inflation actually costs you another $35k in interest over your 30 years.
People who don't pay off their credit cards in full also get to save on those interest rates, which is now effectively 4% because you always pay your cc in full each month.
It maximizes the full use of any bonus money, 3 paycheck months, etc. as soon as the dollars hit your account. It is the mortgage equivalent of staying "fully invested" in the stock market by using DRIPs.
If you keep expenses lower than income, your mortgage falls quickly. As your mortgage falls quickly, it snowballs because you pay less interest. Then, on months when you have more expenses (Christmas!) you can spend more, then immediately starts to fall off again as soon as your expenses are much less than your income..
--------------------
I am a MMM frugal personality, and yet I found it hard to ramp up the savings with a ONE account, due to human behaviours. It works far better for me to "pay myself first" and increase my retirement allocations directly off of my pay. My DH is doubly so, we discovered that he tends to spend within a float threshold of the chequing account. When we have more $$, he spends more.
We ended the 5 years having paid off only about an extra $20k, net, versus what we originally borrowed, and that was only because I made an aggressive plan in the last 2 years, and we started to track our daily expenses. (which I hate).
