Hi just wanted to know if someone can explain this to me with figures, so I can understand how balance transfer work and how they can potentially save you money on your mortgage.
I've only just heard about this method and still trying to understand it all.
What's the real-life savings doing this?
Not much lol
The idea is nice though.
What Tom is saying is correct for small balance transfers used in this way. Mainly due to the fact that there are often annual fees charged by the company issuing the balance transfer approval, time spent filling out forms and supplying paperwork for the application process and already low rates for home loans. That said, we've seen clients save a bit of money when doing this with relatively large sums approaching (approaching $100,000) and with balance transfer providers charging no fees.
Probably the biggest issue will be managing the impact on your credit score and overall borrowing capacity. That is, if you're applying for a 0% balance transfer every 6 months, or multiple 0% balance transfers at once - your credit score will probably drop (ceteris paribus). This is not necessarily a major issue for someone with extremely strong credit, but can be a big issue for someone with an already moderate to low score. Also, having a credit card/balance transfer limit will definitely impact upon your ability to borrow for business or investment purposes (as your borrowing capacity is assessed using the limit, not the sum drawn). So if borrowing for such purposes is important to you, you ought to be mindful of this before going down that road.
Hope this helps.
I have no idea what this question is asking. Are we talking about credit card balance transfers?
In simple terms
get 10K balance transfer done at 0% for 16 months in credit card
Use that for day to day expenses.
Put 10K into offset account
save interest
pay minimum dues per months which is usually 200-300 per month for 10K
If you don't understand it, it's probably better to stay away.
Credit card schemes like this can save a few hundred dollars but you really have to know what you're doing to avoid doing more harm than good.
So invest the time to try to understand it all, but if you find yourself confused or unsure about any aspect, stay away.
Eg a balance transfer with 12 months interest free, still requires you to pay your minimum amount every month. It doesn't mean 12 months of no repayment.
For example sake:
Say your balance transfer is 20k, your mortgage is 400k.
Balance transfer deal = 0% for 2 years and your loan is at 4.5% p.a.
You transfer the balance transfer to yourself 20k, put that 20k in your mortgage. This means your mortgage is now only 380k. Remember you still need to take out money from the mortgage and repay the balance transfer bit every month.