Can Your EPF Money Be Utilised for Your Housing Loan?
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Most salaried Malaysians after working a few years would have accumulated at least a modest amount of money in their EPF accounts. Some would have a vague idea that EPF money can be used to help with the purchase of a house or to pay down a loan. But what exactly can EPF funds be used for? And how does one go about it?
1. Withdrawal to Purchase / Build A House
This scheme allows individuals (or joint purchasers) to withdraw money from their EPF Account 2 to purchase a house (type: bungalow / terrace / semi-detached / apartment / condominium / studio apartment / service apartment / townhouse / SOHO) or a shop lot with residential unit, from a developer, individual, or in a public auction.
To apply, the Sale and Purchase Agreement (SPA) as well as the Housing Loan Approval Letter (unless the house was paid for in cash) or Loan Facility Agreement must be submitted at the time of the application. You can walk in to any KWSP office to submit the KWSP 9C (AHL) (D5) Withdrawal Form , along with the supporting documents or submit via postal services.
In most cases, it would mean that you will have to pay for the following upfront costs first and complete the following before applying for a withdrawal:
1. Booking fee + Down payment for the house.
2. Lawyer fees and stamp duty for the Sale and Purchase Agreement.
3. Obtain the at least the letter of approval for the housing loan.
1. Money from EPF Account 2 can be used to pay the price difference between the SPA house price and the housing loan amount, up to an additional 10% on the price of the house. So if a full housing loan (100%) is obtained, the maximum that can be withdrawn is up to 10% of the price of the house.
2. If the house was purchased using cash, up to 110% of the price of the house can be withdrawn.
3. Any withdrawal amount is always subject to whatever money is available in the applicant's (and where applicable, joint applicant's) Account 2.
Eligibility for withdrawal
1. Withdrawal to purchase the first house.
2. Withdrawal to purchase a second house, provided the first house is sold, or disposal of the property has taken place.
2. Withdrawal to Reduce/Redeem a Housing Loan
This scheme allows individuals to withdraw money from their EPF Account 2 to reduce or redeem the housing loan balance with approved financial institutions. This can be done for individual purchases, joint purchases, or for a spouses' housing loan.
To apply, the latest Housing Loan Balance Statement (no more than 3 months from date of application) and all Loan Redemption Letters (where refinancing was performed before) must be submitted at the time of the application. You can walk in to any KWSP office to submit the KWSP 9C (AHL) (D8) Withdrawal Form , along with the supporting documents or submit via postal services.
1. The entire housing loan balance
2. Any withdrawal amount is always subject to whatever money is available in the applicant's (and where applicable, joint applicant's) Account 2.
Eligibility for withdrawal
1. Withdrawal to reduce / redeem the loan of the first house
2. Withdrawal to reduce / redeem the loan of the second house, provided the first house is sold, or disposal of the property has taken place.
3. Withdrawal to Pay Down Housing Loan Monthly Installment
This scheme is an addition to the above scheme (Withdrawal to reduce / redeem housing loan) and allows you to set up a standing instruction for money from Account 2 to be directly paid to the bank or even directly credited to the your bank account. Once this has been setup, automatic monthly payments can only be cancelled 1 year after the initial withdrawal by filling in the Withdrawal Cancellation Application Form.
To apply, the latest Housing Loan Balance Statement (no more than 1 months from date of application) must be submitted at the time of application. You can walk in to any KWSP office to submit the KWSP 9P (AHL) Withdrawal Form, along with the supporting documents. The full list of T&Cs plus the necessary supporting documents can be found at KWSP's website
4. Boosting your reported monthly income to qualify for a higher value loan
This scheme is useful for people who want to apply for a higher value loan than they normally would qualify for. Individuals are able to apply to EPF to set aside a certain amount from their Account 2 to be put into a special "Flexible Housing Withdrawal Accountâ€. Monthly contributions to this account are treated as income to the person, thus allowing the individual to obtain a higher loan amount for the purchase/building of a house.
In addition to setting a fixed amount to be transferred from your Account 2 monthly, you can also apply to have an initial lump sum transfer from the savings already in Account 2.
What happens to money inside the Flexible Housing Withdrawal Account?
The money inside this account still belongs to the individual under EPF's control. It is not given to the bank, and will continue to earn dividends from EPF. However, funds inside this account cannot be accessed by the individual until certain special conditions are met, one of which is the consent and approval of the bank to "unfreezeâ€ the money. Typically, banks would consent to it when the "real incomeâ€ of the person has caught up with the amount supplemented by the amount transferred from the Account 2 monthly.
Additionally, the application to "unfreezeâ€ the money and stop any future transfer of funds to the Flexible Housing Withdrawal Account can only be made 1 year after the initial application.
How to Apply
1. Notify the Financial institution of the intent to apply for this Flexible Housing Withdrawal Account during the application process. Obtain verification from the Financial Institution on the loan details.
2. Submit application via the Financial Institution
The Flexible Housing Withdrawal must be applied together with:
1. Withdrawal to Purchase/Build a House, OR
2. Withdrawal to Reduce/Redeem Housing Loan
The full list of T&Cs plus the necessary supporting documents can be found on KWSP's website