Bi-weekly payment plans are a smart way to pay off your mortgage early, and they're generally easy to set up by yourself. With this clever arrangement, you pay no more than usual, but can save thousands of dollars during the life of a typical mortgage.

One of the simplest ways to save money on a mortgage is to end it early by reducing the length of time it takes to pay off the principal balance. But spending extra income each month to pay down the principal is often unadvisable, since it ties up money that you could otherwise use to invest for greater returns, or pay other debts and expenses. A bi-weekly (every two weeks) payment plan, however, doesn't involve dedication of any extra monthly funds to pay the mortgage. You simply divide the monthly payment in half, and send in one payment every two weeks. This adds up to exactly the same amount per month. If your normal payment is $1,200 per month, for example, pay $600 every two weeks. The end result is that you'll pay off your mortgage faster, reducing the cost of a 30-year loan by thousands of dollars.

How the plan works

When you use the bi-weekly plan, you're making the equivalent of 13 monthly payments each year, not the usual 12, but with no extra out-of-pocket cost. This will reduce the number of months you service the loan by about 8 percent, because you're accelerating your payments by about the same percentage per year. How and why it works is a function of arithmetic, because of the way our calendar is designed, and the fact that amortization schedules follow a monthly payment system.

Here's what happens when you pay bi-weekly instead of monthly: There are 12 months in each year. When you pay monthly, you make a total of 12 payments per year. Double that frequency by paying twice each month, and you're making 24 bi-weekly payments each year (12 x 2 = 24). However, there are 52 weeks in a year. If you divide 52 weeks by 12 months, it doesn't work out to four weeks per month, but to slightly more than 4.3.

The extra fraction adds up. As a result, if you pay bi-weekly, you'll wind up making 26 payments per year instead of 24. These two extra bi-weekly payments equal an entire extra monthly payment. In reality, you're making 13 monthly payments annually.

Before you use this strategy, make sure that your lender permits bi-weekly payments. Don't pay a mortgage company or bank to set up and run a bi-weekly program, because it's not worth the added cost. If you're somewhat organized and disciplined, it's just as easy to mail the checks every other week by yourself for the price of an additional postage stamp.

The "byes" have it: By going bi-weekly, you'll be saying bye bye to your mortgage a lot sooner.