Can a Home Loan Be Transferred to Another Person?

Introduction

Life is full of transitions—selling your property, gifting a home to a family member, or restructuring finances after a divorce. In such situations, one question often arises: Can a home loan be transferred to another person?

While home loans are typically sanctioned to individuals based on their income and credit profile, under certain legal and financial conditions, transferring that responsibility to someone else is possible. However, it’s not as simple as handing over the keys. It involves lender approval, legal documentation, and the new borrower’s eligibility.

For those navigating such complexities, services like Nihal Fintech’s easy home loan solutions can offer expert guidance on managing transitions, refinancing, or even switching lenders.

In this blog, we’ll explore whether a home loan transfer is possible, the scenarios in which it can be done, the step-by-step process involved, and the financial implications you should consider before making the move.

Can You Legally Transfer a Home Loan to Another Person in India?

Transferring a home loan isn’t as straightforward as selling a car or passing on a mobile connection. It involves legal consent from the lender, eligibility checks for the new borrower, and complete documentation. That said, yes, it is legally possible to transfer a home loan to another person—but only under specific conditions and with the lender’s approval.

What Banks and Lenders Allow

Banks and NBFCs generally allow home loan transfers in limited scenarios. These may include:

• Sale of property: When you sell your home, the buyer can take over the existing home loan, provided they qualify. In such cases, a home loan balance transfer is often processed along with the ownership change. You can explore this process in detail through our guide on how to check all loan details using your PAN number.
  
• Family inheritance or gift: If a family member inherits the property or it’s gifted, they can apply to transfer the loan in their name. However, the bank will still review their creditworthiness, just as they would for a fresh unsecured personal loan.
  
• Divorce or legal settlements: One partner may choose to retain the home and the associated loan post-divorce. In such cases, the lender may allow transfer from one borrower to another, provided the new sole borrower meets the income and credit criteria.

When Is a Home Loan Transfer Typically Allowed?

Here are some practical scenarios:

• On the property’s resale: The new buyer may prefer taking over the current loan to avoid reapplying, especially if interest rates are favorable. This method is more viable when the seller has a good repayment track.
  
• After the death of the original borrower: The legal heir may request to take over the loan. This often requires the bank’s approval and might also involve updating ownership documents. For more insights, see our blog on the difference between home loan and loan against property.
  
• Family property restructuring: A parent might transfer the loan to their child as part of estate planning, where the child assumes full repayment responsibility.
  

Keep in mind that even if legally permissible, not all banks approve such requests easily. The new borrower must meet the same eligibility norms as any new applicant, including income proof, property documents, and credit scores. If you’re planning such a switch, you might also want to compare the best banks for home loans to see if a refinance or fresh application makes more sense financially.

How to Transfer a Home Loan to Another Person: Step-by-Step Guide

Transferring a home loan involves more than just updating a few names. It’s a formal legal and financial procedure that banks treat almost like a fresh loan application. Here’s how the process unfolds:

Step 1 – Get Approval from the Bank or Lender

Before anything else, you need to request formal consent from your lender. They won’t approve a transfer just because you ask; they’ll evaluate the reason, check the profile of the new borrower, and assess whether the home loan terms still align with their internal risk policies.

If you’re still undecided on the right financial partner, this might be the right time to explore a home loan balance transfer to a bank with better interest rates or flexible repayment terms.

Step 2 – New Borrower’s Eligibility Check

The new person taking over the loan must pass all standard checks:

• Credit score (typically 700+)
  
• Income proof and employment stability
  
• Debt-to-income ratio
  
• Existing financial obligations
  

If the individual has a low credit score, lenders may reject the request or charge a higher rate. For guidance in such situations, read our blog on how to get a loan with a bad credit score.

Step 3 – Legal & Property Documentation

Once eligibility is confirmed, the next step is updating the paperwork:

• New sale deed or gift deed (depending on the transfer nature)
  
• Revised home loan agreement
  
• Fresh Know Your Customer (KYC) documents
  
• Income tax and identity verifications
  

In some complex cases, the process may resemble applying for a transfer home loan against property, especially if collateral needs reassessment.

Step 4 – Execution & Registration

After paperwork clearance, the new borrower signs the loan documents, and the property ownership transfer gets legally registered. This completes the transfer process, and EMI payments begin in the new borrower’s name.

If you’re also considering an upgrade in your property, you might find our article on home loan interest rates in Mumbai helpful to explore competitive offers.

Tax Benefits and Financial Impact of Transferring a Home Loan

Transferring a home loan isn’t just a paperwork task—it also carries important tax and financial consequences. Whether you’re the outgoing borrower or the incoming one, here’s what you should know:

Impact on EMI and Credit Records

For the original borrower, once the transfer is complete, their repayment obligation ends. This can positively impact their credit profile by reducing their credit utilization. The new borrower, however, takes on a fresh financial responsibility.

It’s crucial that the lender updates credit bureaus with the new arrangement to avoid errors in credit reports. If you’re trying to rebuild your credit post-transfer, this might be a good time to understand how such transitions affect your eligibility for future loans, especially if you’re planning to apply for an unsecured business loan or credit line.

Tax Deduction Changes

Home loan borrowers enjoy significant tax benefits under sections 80C (for principal repayment) and 24(b) (for interest payments). Once the loan is transferred, the original borrower can no longer claim these deductions.

The new borrower becomes eligible for these tax deductions—but only from the date the loan is legally transferred to them through the home loan transfer process. For self-employed or salaried individuals planning to avail these benefits, ensure the lender provides a fresh interest certificate under the new borrower’s name. For more on this, you can also refer to our coverage on what is 80EEA housing loan interest.

Best Alternatives If You Can’t Transfer a Home Loan

If transferring a home loan to another person seems complex or isn’t approved by your lender, there are other ways to manage the situation. These alternatives can be faster, easier, or more appropriate depending on your circumstances.

Co-applicant Addition or Removal

One of the simplest alternatives is to add or remove a co-applicant from the home loan. This is common in cases of marriage, divorce, or family restructuring. Most banks allow this provided both parties agree and the income stability remains unaffected.

This process doesn’t transfer full ownership of the loan but modifies repayment responsibilities—often a practical option when one person wants to remain partially accountable. In case you’re comparing multiple lending products, check our guide on secured vs. unsecured personal loans to understand your flexibility.

Home Loan Balance Transfer

Instead of shifting the loan to a new person, you can shift it to a new lender. This is particularly helpful if you’re seeking:

• Better interest rates
  
• Lower EMI options
  
• Extended loan tenure
  

During this process, you may also negotiate revised ownership terms or restructure the loan jointly. It works well for borrowers who want to update loan terms without formally changing the borrower. We’ve covered this concept in detail in our article on what is the interest rate on a business loan—you’ll find similarities in how rates are calculated for different loan amounts.

Loan Against Property (LAP)

If the goal behind the transfer is to raise funds or repay the loan differently, consider a Loan Against Property. This option allows you to unlock property value while retaining ownership, offering greater flexibility. It’s especially useful when large sums are needed for business or personal reasons. Learn more in our dedicated guide on what is loan against securities.

Home Loan Transfer Challenges and Precautions to Keep in Mind

While transferring a home loan may seem like a smart move, the process isn’t always smooth. Several roadblocks can appear, especially if the financial or legal aspects aren’t well-aligned. Here’s what to watch out for:

Bank Refusals and Policy Limitations

Lenders aren’t obligated to allow a transfer home loan. If the incoming borrower doesn’t meet the required eligibility criteria—such as a minimum credit score or steady income—the bank may decline the request. For individuals facing such denials due to poor credit, our blog on how to get a business loan with a low CIBIL score offers tips that can be adapted for home loans too.

New Borrower’s Credit Risk

If the person you’re transferring the loan to has an unstable income or poor repayment history, the lender may either reject the application or hike the interest rate. This could negate the financial advantage of transferring the loan.

Legal Disputes and Inheritance Complications

If the transfer is happening due to inheritance, there could be multiple claimants to the property. Unless there’s a clear legal heir, banks will not approve the transfer. In such cases, understanding the difference between a home loan and a loan against property can guide better financial planning.

Prepayment Charges or Reprocessing Fees

Some banks charge additional fees for processing a transfer, especially if it’s treated as a balance transfer or a new loan agreement. Always read the fine print and compare this cost with the benefits. If you’re unsure, consider consulting an expert before proceeding. Nihal Fintech provides professional advice through its contact team for such cases.

Should You Transfer a Home Loan? Final Thoughts and Tips

Transferring a home loan to another person is legally permissible, but it involves several steps—from securing lender approval to completing legal documentation and ensuring the new borrower qualifies. While it’s not always the easiest route, in the right situations—like property sale, inheritance, or family transfers—it can be a smart financial move.

However, alternatives like adding a co-applicant, opting for a home loan balance transfer, or using your asset for a loan against property might be simpler depending on your goals.

If you’re unsure of the best course, consulting a financing partner like Nihal Fintech can give you clarity. From home loan comparisons to quick personal and business loan options, their team ensures you get expert-backed guidance tailored to your situation.

FAQ’s On Home Loan Transfer