Paying Off Your Mortgage Faster: How Daily Payments Can Help You Save on Interest
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Are you tired of paying a large amount of interest on your mortgage every month? If you live in Ontario, you might be able to pay off your mortgage faster and save on interest with a simple trick – making daily payments.
Variable-rate mortgages rely on daily compound interest, which means that interest is calculated based on the new balance each day. By making daily payments, you can reset the interest each day and apply the payment to the principal balance, reducing the overall amount of interest paid over time.
Here's how it works. Let's say your monthly mortgage payment is $1,000. On day one, you make a payment of $1. On day two, the interest would have been $2 due to the compound interest, but it's reset back to $1 because of the previous day's payment. You continue making daily payments of $1, which covers the daily interest charge and resets it for the following day.
By doing this, you are essentially paying off the daily interest as it accrues and applying the payment to the principal balance. This means that more of your payment is going towards the principal each month, which can help you pay off your mortgage faster and reduce the amount of interest paid over time.
For example, if the total amount of interest for the month would have been $700, by making daily payments, you've paid off the daily interest charges and applied $700 to the principal balance instead. This can help you save a significant amount of money in interest charges over the life of the mortgage.
It's important to note that not all lenders allow daily payments or may charge fees for making frequent payments. Additionally, making consistent daily payments can be challenging for some people, so it's important to assess your financial situation and ensure that this strategy is feasible for you.
In conclusion, making daily payments on your variable-rate mortgage can be an effective way to reduce the amount of interest paid over time and pay off your mortgage faster. If you're looking to save on interest charges and become mortgage-free sooner, consider making daily payments and start reaping the benefits today.
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