Balance Transfer is the process of transfering the balance of your loan from one lender to another. It is also referred to as refinancing of your loan. It is not an option for borrowers who have been with a bank for less than two years.

The pros of a balance transfer:

• You can reduce the cost of borrowing on the mortgage and save on interest costs, bringing down the cost of your home.
• You can free up cash by encashing the increased value of your home. 
• You can lock yourself in a fixed rate of interest if rates are lowered. 

The cons of a balance transfer:

• You will often have to pay your bank a pre-payment penalty, which can be anywhere between 2-5% of the outstanding principal at the time of refinance.
• You will have to pay the new lender's processing fee of your new lender, which can be between 0.25%-1% of the amount of the loan for which you have applied.
• You will have to undergo another credit appraisal include the whole documentation process with your new lender all over again

If you feel that your reasons for a refinance are compelling, begin the process as soon as possible to avoid unnecessarily paying a substantial amount of interest.