A home loan balance transfer is one of the most effective ways to reduce your EMI burden, lower your interest rate, or get better loan terms. Many borrowers in India choose to transfer their existing home loan to another bank or NBFC to enjoy lower interest rates, flexible repayment options, or top-up loan facilities.
However, not every application gets approved. Even if you have been regularly paying your EMIs, lenders may still reject your home loan balance transfer request due to several financial or documentation-related reasons.
Understanding these reasons can help you avoid rejection and improve your chances of securing the best home loan balance transfer deal. Here are the most common reasons why lenders may decline your application.
- Low or Unstable Credit Score
A strong credit score is one of the biggest factors lenders consider for approving a home loan balance transfer. Most housing finance companies require a minimum CIBIL score of 700 or above. If your score is low due to late payments, multiple loan inquiries, or high unsecured debt, lenders may reject your transfer request.
How to avoid this:
- Maintain timely EMI payments
- Avoid taking too many loans simultaneously
- Keep your credit utilization ratio below 30%
- Review your credit report for errors and get them corrected
A healthy credit score not only increases approval chances but also helps you secure the best home loan balance transfer offers.
- Insufficient Repayment Track Record
For a successful balance transfer, lenders typically check whether you have completed a minimum number of EMI payments with your existing bank—usually 12 to 18 months. If your repayment history is too short or inconsistent, lenders may consider you high-risk.
How to avoid this:
Ensure you have paid EMIs consistently for at least one year before applying.
- High Existing Debt or Poor Debt-to-Income Ratio
Your debt-to-income (DTI) ratio determines how much of your monthly income goes toward loan repayments. If your DTI is too high—typically above 50%—lenders may worry about your repayment capacity.
How to avoid this:
- Clear smaller loans or credit card dues before applying
- Increase your income documentation if possible
- Add a co-applicant to strengthen your loan eligibility
- Drop in Property Value During Revaluation
During a home loan balance transfer, the new lender reassesses the property value. If the property has depreciated, is located in a low-demand area, or does not meet the lender’s technical standards, the application may be rejected.
How to avoid this:
- Maintain your property in good condition
- Avoid applying if property rates in your area have significantly dropped
- Incomplete or Incorrect Documentation
Missing or incorrect documents are one of the most common reasons for rejection. Lenders require:
- Property papers
- Previous loan statements
- Income proofs
- Identity documents
- Employment proofs
Any mismatch in signatures, missing pages, or incomplete forms can delay or deny approval.
How to avoid this:
Double-check all documents with your current lender before applying.
- Unstable Employment or Business Profile
Lenders prefer applicants with stable employment or steady business income. If you have recently changed jobs, work in a high-risk industry, or have inconsistent business revenue, your balance transfer may be declined.
How to avoid this:
- Apply after completing at least 6–12 months in your current job
- Maintain clean financial statements if self-employed
- History of Loan Settlement or Write-off
If you have settled or written off any loan in the past, even if it was several years ago, it negatively impacts your creditworthiness. Lenders view settled loans as red flags and may reject your balance transfer request.
How to avoid this:
Maintain a clean repayment history and avoid loan settlements unless necessary.
- Legal or Technical Issues with the Property
If the property has legal disputes, incomplete approvals, unauthorized construction, or missing documentation, lenders will not proceed with the transfer. Technical issues detected during the lender’s verification process can also lead to rejection.
To avoid this, ensure your property has:
- Clear title
- Approved building plans
- Up-to-date taxes and documents
- Application for a Very High Loan Amount
If you request a loan amount higher than the lender’s approved loan-to-value (LTV) ratio, the application may get rejected. Most lenders offer 65–80% of the property value as LAP.
How to avoid this:
Apply only for the amount that fits within the lender’s LTV criteria.
- Frequent Balance Transfers or Multiple Loan Applications
Applying for multiple loans or frequently transferring your home loan can signal financial instability to lenders. They may consider you a high-risk borrower and refuse approval.
How to avoid this:
Only apply for a balance transfer when necessary and avoid multiple simultaneous applications.
Final Thoughts
A home loan balance transfer is an excellent financial strategy to reduce your EMIs and benefit from lower interest rates, but only when your application meets all lender requirements. By improving your credit score, maintaining steady income, ensuring proper documentation, and keeping your property legally compliant, you can increase your chances of getting approved.
If you aim to secure the best home loan balance transfer deal, prepare your documents thoroughly, check your eligibility with the new lender, and ensure your financial profile is strong before applying. With the right approach, a balance transfer can significantly reduce your loan burden and improve your long-term financial health.
