Using your EPF savings for a new home

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While your EPF savings are meant as a nest egg, you can also use a portion of it for housing purposes. (Rawpixel pic)

In December 2020, the Employees’ Provident Fund (EPF) announced the i-Sinar scheme that allows members whose income has been affected by the Covid-19 pandemic, to withdraw up to RM10,000 from their Account 1.

Under normal circumstances, funds in Account 1 could be touched until members reached retirement age.

But did you know that you can withdraw funds from Account 2 at any time for special cases like buying or building a new house?

You can also use your EPF Account 2 savings to reduce/redeem your housing loan and settle your monthly instalments.

Of course, all withdrawal limits are subject to the current balance of a member’s Account 2, but assuming you’ve been working for around 10 years, with consistent EPF contributions, you should have accumulated a modest amount of savings that will greatly lessen your burden.

You can use your EPF Account 2 savings to reduce/redeem your housing loan and settle your monthly instalments.

Requirements

According to EPF’s official website, there are several housing-related categories that you can withdraw for, each with slightly different procedures and documents.

Other than the above mentioned categories, there is also Flexible Housing and PR1MA Housing.

In general, it is open to all Malaysians and permanent residents who are EPF contributors under the age of 55. Applicants must have a minimum of RM500 in their Account 2 and receive a loan from loan providers recognised by EPF.

Only residential property purchases are eligible for EPF withdrawals and applications must be made within three years of signing the Sales Purchase Agreement (SPA) or Construction Agreement.

However, if you have overshot the three years, fret not as you can still apply under the category of ‘reducing housing loan’ or ‘paying monthly instalments’.

Another common criterion for all the above options is that this is your first housing withdrawal, or you have already disposed of the first property you originally applied for, with proof of transfer of ownership.

To apply for withdrawal for the intention of reducing your housing loan, there is the additional requirement that the residential home be registered as collateral, and can only be applied for once a year.

Meanwhile, to withdraw your EPF savings for monthly instalment payments, you must have a minimum of RM600 in your Account 2 and must have started paying the housing loan.

To withdraw your EPF savings to pay for monthly instalments, you must have a minimum of RM600 in your Account 2 and must have started paying the housing loan. (Bernama pic)

How to apply for Account 2

EPF has made Account 2 withdrawals more convenient as you can make an online application rather than manually at an EPF branch.

So, first things first, you’ll need to register for an i-Akaun, which you can now do online via email.

According to Loanstreet.com.my, EPF is efficient in processing housing withdrawal applications, as it takes less than three weeks from the application date to getting the money deposited into your account.

Nevertheless, it’s not a good idea to make use of this withdrawal option as a shortcut instead of saving money.

As mentioned above, one of the documents required in your application is the SPA or Construction Agreement, meaning that you’ll still need to fork out your own cash to pay the booking fee, down payment, lawyer’s fees and stamp duty. Only then will you be able to secure a home loan and sign the SPA.

Afterwards, you can apply to withdraw the difference between the house price stated in the SPA and the housing loan amount.

If you have obtained a 100% housing loan, you can withdraw a maximum of up to 10% of the house price. Meanwhile, if you purchased the house in cash, you may withdraw up to 110% of the house price.

For example:

SPA price = RM500,000

Loan amount (90%) = RM450,000

Withdrawal amount = (RM500,000 – RM450,000) + (10% X RM500,000)

= RM100,000

As for those who intend to apply for withdrawals to reduce their housing loan, you’ll require the latest housing loan balance statement, dated no more than three months from the date of your application.

If refinancing has been performed, the loan redemption letters will also be needed.

For this category, the withdrawal limit is the entire housing loan balance or the money available in Account 2 of the applicant(s).

To withdraw your savings to pay your housing loan monthly instalments, you’ll need to provide your most recent housing loan balance statement dated no more than one month from the date of application.

You can then set up standing instructions for money equivalent to the monthly instalment to be credited either to your account or directly to the loan provider.

Should you use your EPF savings to obtain a new home?

Remember, EPF savings are meant for your golden retirement years. That being said, it is also important to have a roof over your head regardless of your age.

Since financial situations vary from person to person, it is recommended you do your due diligence and meet with a financial consultant either from your loan provider or EPF themselves to further understand EPF withdrawal for housing purposes.

Alternatively, you can also study the explanations on the EPF website to gain a clearer understanding before making a decision.

This article was written by Adlene Hanna of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.