| Are you looking to pay off your mortgage sooner | | | | $500 every two weeks. |
| without additional lump sum payment? Your lender | | | | Let's put what we learn to work. To calculate your |
| allows you to pay a certain percentage once or twice | | | | bi-weekly payment, calculate your monthly payment. |
| in a year. Usually, the lender allows 20% of the principal. | | | | Divide your monthly payment by 2. Suppose you want |
| For example, your principal amount sums up to | | | | to know the monthly payment for a 30 year mortgage |
| $100,000. You can pay up to $20,000 of additional lump | | | | for $150,000 at 5% interest rate. Rate equals .00417 |
| sum payment. Sometimes, lump sum payment can be | | | | which is interest rate divide by twelve months, while |
| hard on your pocket. You might consider bi-weekly | | | | number of payments equals 360 (30 years X 12 |
| mortgage payment. In a bi-weekly plan, you make | | | | months). You pay $402.62 every two weeks. |
| additional lump sum payment on a regular basis on a | | | | Here is the actual bi-weekly payment mortgage |
| smaller amount. | | | | calculation: |
| You pay every two weeks rather than every month. | | | | = ([P(1 + r)nr]/[(1 + r)n - 1])/2 |
| You make 12 payments for monthly payment in a | | | | = ([$150,000(1 + 0.00417)360 0.00417] / |
| year, while you make 26 payments for bi-weekly | | | | [(1 + 0.00417)360 - 1])/2 |
| payment in year. Since you make more payment, you | | | | = (2797.92 / 3.47) / 2 |
| put more money to reduce the total mortgage amount. | | | | = 402.62 |
| For example, you pay $1,000 per month in a monthly | | | | Since you pay $402.62 every two weeks, you save 4 |
| payment plan. In a bi-weekly payment plan, you pay | | | | years 9 months, and $25,767.44. |