Are you looking to pay off your mortgage sooner without additional lump sum payment? Your lender allows you to pay a certain percentage once or twice in a year. Usually, the lender allows 20% of the principal. For example, your principal amount sums up to $100,000. You can pay up to $20,000 of additional lump sum payment. Sometimes, lump sum payment can be hard on your pocket. You might consider bi-weekly mortgage payment. In a bi-weekly plan, you make additional lump sum payment on a regular basis on a smaller amount.

You pay every two weeks rather than every month. You make 12 payments for monthly payment in a year, while you make 26 payments for bi-weekly payment in year. Since you make more payment, you put more money to reduce the total mortgage amount. For example, you pay $1,000 per month in a monthly payment plan. In a bi-weekly payment plan, you pay $500 every two weeks.

Let's put what we learn to work. To calculate your bi-weekly payment, calculate your monthly payment. Divide your monthly payment by 2. Suppose you want to know the monthly payment for a 30 year mortgage for $150,000 at 5% interest rate. Rate equals .00417 which is interest rate divide by twelve months, while number of payments equals 360 (30 years X 12 months). You pay $402.62 every two weeks.

Here is the actual bi-weekly payment mortgage calculation:

= ([P(1 + r)nr]/[(1 + r)n - 1])/2

= ([$150,000(1 + 0.00417)360 0.00417] /
[(1 + 0.00417)360 - 1])/2

= (2797.92 / 3.47) / 2

= 402.62

Since you pay $402.62 every two weeks, you save 4 years 9 months, and $25,767.44.