The reasons for that can be:
i) If your have a conventional fixed-rate or adjustable rate mortgage, and it is really as young as 2 years, it is natural for the balance to reduce insignificantly because of the “leveling” of monthly payments. You can find a more detailed explanation in my article about FRMs; but in short, in early years each monthly payment pays mostly towards the interest. Only in later years the monthly proportion of money paid towards the principal increases and then the reduction of the outstanding balance becomes more noticeable. The principal payment is always a remainder - the total monthly payment minus the interest; and if with a FRM everything is pre-calculated and the monthly amount is set, ARM monthly payments change to meet the new rate and serve, first of all, the interest; the principal gets the residual. Generally, this case presents nothing to worry about.
ii) If the balance is totally unchanged, you probably have an interest-only mortgage, i.e. everything you pay every month is paid towards the interest only.The balance will start to reduce only if you make an extra payment or when the interest-only period is over. For more details on Interest-Only mortgages read here.

 It’s amazing how surprised people usually are to find out how much an extra $20 payment may save them on their loan in the long run. For example, a $100,000 30-year mortgage bearing 9 percent annual interest calls for monthly payments of $804.62. Suppose a borrower could afford to increase the payment amount by $20 to $824.62, and the lender does not charge prepayment penalties. By making the larger payment each month, the borrower would save $24,135.56. No, you didn’t misread the amount. An extra $20 a month results in roughly $24,000 of interest savings!

Here is our little manual on how to work your own miracle.

First of all, the topic you absolutely must discuss with your mortgage lender is the treatment of extra payments towards principal, because some lenders tend to include a penalty clause regarding extra principal payments in the mortgage. If your credit score is not particularly high, you will very likely have a mortgage loan with a higher-than-average interest rate, and you may be penalized if you try to make extra or early principal payments on the loan.

If your lender allows you to make extra payments - it is action time! Read the rest of this article »