DO YOU KNOW THAT YOU CAN USE YOUR EPF TO BUY A HOME

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Do you know that you can use your EPF to buy a home?

Are you planning to buy a house on your own? However, with the recent hike in property’s price over the years, it has become financially unaffordable for you to buy a house on your own, especially for young working adults. You start calculating the mortgage repayment by using a Malaysia loan calculator. You certainly do not want to get into a financial burden as well.  Therefore, you try applying for first time homebuyer schemes. But with many restrictions, limitations and criteria such as age, income level and the balloting process, it is not easy to get selected. Bank loan alone will not give you a 100% loan financing and you cannot afford to pay the downpayment. Fret not, there is still one option left for us Malaysian. People who are not qualified for the homebuyer schemes couls withdraw money from their EPF accounts to fund their downppayment.

Withdrawing money from your EPF account to buy a house comes with benefits as well:

1. Interest free

A straight-forward benefit. It is interest free to withdraw money out from your EPF account.

2. Affordable monthly installment

Withdrawing money from your EPF accounts to pay for downpayment will help you release your financial burdens by paying lesser monthly instalment.

3. Save on housing loan’s interest rate

You can use the money you withdrew from your EPF account to pay off the high interest rate and save the remaining interest cost to fund other miscellaneous costs.

4. Helping spouse

You can pay for your spouse’s home loan and help reducing his or her financial burden.

Withdrawing money from your EPF do come with some drawbacks as well, such as:

1. Retirement plan

After withdrawing money from your EPF account to buy a house, your retirement plan will surely be affected. So make sure you have other retirement savings or plans before deciding on withdrawing money from your EPF account to buy a house.

2. Reduced dividend earning

When you withdrawing a huge sum of money from your EPF account, you are also earning less from the dividend earnings of 5%-6% per annum.

3. Account 2 money withdrawal

You are only allowed to withdraw money from Account 2 and not Account 1 where it holds majority (70%) of your monthly contributions.

After thinking through the pros and cons, here comes the application. You are allowed to apply if:

1. You hold a Malaysian citizenship;
2. You are a permanent resident;
3. You are a non Malaysian who was once an EPF member prior to 1st August 1998;
4. You are under 55 years old with a minimum of RM500 in your EPF Account 2;
5. You just signed a Sale and Purchase Agreement lesser than three years ago and intending to buy a residential property with cash or housing loan.

Next question would be how much money can you withdraw from your EPF account? This will then depend on the details of property purchased:

1. 100% home loan

If you have secured yourself a 100% home loan from the bank, the maximum amount you can withdraw from your EPF account will be 10% of the property’s price to help you pay with other upcoming fees.

2. Buying a home on your own

If you are buying a property on your own, you are allowed to withdraw the difference between the loan amount approved and the price of property, with an additional of 10% property’s price. Or you could withdraw all your money in Account 2, whichever that is lower and more than RM500.

3. Buying a home with your spouse or family member

If you are buying a property with one of your immediate family members or wife, you are allowed to withdraw the difference between the loan amount approved and the price of property, with an additional of 10% property’s price. Or you could choose to withdraw money from both your and your wife’s or family member’s Account 2, whichever that is lower and not lesser than RM500.

4. Buying with only cash and no loan

If you are not applying for any bank loans and intend to pay with cash, your withdrawal limit would be the property’s price with additional 10% or all your money in Account, whichever than is lower and not lesser than RM500.

Lastly, you will need to bring along these documents when you apply to withdraw money from your EPF account to purchase a house:

1. KWSP 9C (AHL) (D5), could be done online or fill in the form that can be found online
2. Identification Card
3. Bank Statement
4. Sale and Purchase Agreement
5. Proof of relationship to your family members if you are applying for joint applications
6. Certificate of Fitness (for new developments)
7. Dead of Assignment (for property with no title)

Make sure you prepare and complete all the documents beforehand to avoid getting your application rejected.

With all the advantages it will come with disadvantages as well. There are a few limitations if you wish to withdraw money from your EPF account to buy a house:

1. Prohibited for investment purpose

You are not allowed to withdraw money from your EPF account to buy properties for investment purpose. Your application might be revoked if they found out that there is a transfer in ownership of your property within one year.

2. Second homes

In order to apply for withdrawal to buy your second home, you will first need to sell off your previous property and provide a proof.

3. Renovation

You are not allowed to withdraw money from your EPF account to renovate your house.

4. Land purchase

You are only allowed to withdraw money from your EPF account to buy land if you intend to build property on the land. Land purchasing alone is not allowed.

5. Purchasing a house overseas

You are not allowed to withdraw money to purchase houses overseas unless you plan to migrate and withdraw all money from your EPF accounts.

Although withdrawing money from your EPF account comes with some restriction, do note that you are withdrawing the money mainly for one purpose, which is to make buying your first own home possible in Malaysia. If you have tried applying for homebuyer schemes but did not get qualified and you need help in funding, you can always choose withdrawing money from your EPF account.

~ Bonde Senyum Riang ~