After several years of employment, the majority of salaried Malaysians typically amass a modest sum in their Employee Provident Fund (EPF) accounts. While some may possess a vague notion that EPF funds can aid in home purchases or loan repayments, the precise range of applications and the procedure for accessing these funds remain unclear. But what exactly can EPF funds be used for? And how does one go about it?
1. Withdrawal to Purchase/Buy a House
This program enables individuals (or joint buyers) to utilize funds from their EPF Account 2 to purchase residential properties such as bungalows, terraces, semi-detached houses, apartments, condominiums, studio apartments, service apartments, townhouses, and SOHO units, whether from developer, private seller, or through a public auction.
To apply for this scheme, applicants must submit the Sale and Purchase Agreement (SPA) and the Housing Loan Approval Letter (unless the property was purchased outright) or the Loan Facility Agreement. These documents can be submitted in person at any KWSP office by completing the KWSP 9C (AHL) (D5) Withdrawal Form, along with the necessary supporting documentation, or they can be sent via postal services.
In most cases, applicants are required to cover the following upfront expenses and fulfill the following prerequisites before initiating the withdrawal process:
- Payment of the booking fee and down payment for the chosen property.
- Settlement of lawyer fees and stamp duty related to the Sale and Purchase Agreement.
- Obtaining at least a letter of approval for the housing loan.
Funds from EPF Account 2 can be utilized to cover the price difference between the Sales and Purchase Agreement (SPA) house price and the amount of the housing loan, with an additional allowance of up to 10% of the house price. Consequently, if a full housing loan (100%) is secured, the maximum allowable withdrawal is limited to 10% of the house's total cost.
If the house is acquired using cash, individuals can withdraw up to 110% of the house price.
It's important to note that the withdrawal amount is always contingent upon the available funds in the applicant's (and, if applicable, joint applicant's) Account 2.
Eligibility for Withdrawal
- Utilize EPF funds to purchase your first home.
- Access EPF funds for the purchase of a second home, contingent upon the sale of your initial property or property disposal.
- For a comprehensive list of terms and conditions, along with the required supporting documents, please refer to the respective sections on KWSP's website: the "Purchase" section for buying a house or the "Construction" section for building a house.
2. Withdrawal to Reduce/Redeem a Housing Loan
This program allows individuals to make withdrawals from their EPF Account 2 to reduce or fully pay off their housing loan balances with approved financial institutions. This option is available for both individual and joint property purchases, as well as for spouses' housing loans.
To apply for this program, you will need to provide the most recent Housing Loan Balance Statement (dated no more than 3 months from the application date) and all Loan Redemption Letters (if any refinancing was previously conducted). You can submit your application by either visiting any KWSP office in person or submitting the KWSP 9C (AHL) (D8) Withdrawal Form along with the required supporting documents or by using postal services.
The total balance of the housing loan is contingent upon the available funds in the applicant's (and, if applicable, joint applicant's) Account 2.
Eligibility for Withdrawal
- Withdrawal for the purpose of reducing or repaying the loan on the primary residence.
- Withdrawal to offset or settle the loan on a secondary residence provided that the primary residence has been sold or the property has been disposed of.
You can access the complete terms and conditions, along with the required supporting documents, by visiting the KWSP 9C (AHL) (D8) Withdrawal Form on the KWSP website.
3. Withdrawal to Pay Down Housing Loan Monthly Instalment
This additional option complements the earlier scheme for reducing or redeeming your housing loan through withdrawals. It allows you to establish a standing instruction for funds from Account 2 to be either directly transferred to your bank or credited to your bank account. Once this instruction is set up, automatic monthly payments can only be cancelled after one year from the initial withdrawal by completing the Withdrawal Cancellation Application Form.
To apply, you need to provide the most recent Housing Loan Balance Statement (dated no more than one month from the application date). You can visit any KWSP office to submit the KWSP 9P (AHL) Withdrawal Form along with the necessary supporting documents. The complete terms and conditions, as well as a list of required documents, can be accessed on the KWSP website.
4. Increasing Your Monthly Reported Income to Meet The Eligibility Criteria For a Higher-Value Loan
This scheme proves advantageous for individuals aspiring to secure larger loan amounts than their typical eligibility permits. It enables applicants to request the EPF to allocate a specific portion from their Account 2 into a designated "Flexible Housing Withdrawal Account." These monthly contributions made to this account are considered as part of the individual's income, thus enabling them to qualify for a higher loan amount when purchasing or constructing a house.
Furthermore, aside from establishing a fixed monthly transfer from Account 2, individuals also have the option to request an initial lump sum transfer from their existing savings in Account 2.
What Happens to Money Inside The Flexible Housing Withdrawal Account?
Furthermore, the release of funds from this account, which remains under the control of the individual within the EPF, is contingent upon specific conditions being met, including obtaining the bank's consent and approval to access the funds. Typically, banks grant approval when the individual's "real income" catches up with the supplemented amount transferred from Account 2 on a monthly basis. Moreover, the request to unfreeze the funds and halt future transfers to the Flexible Housing Withdrawal Account can only be made one year after the initial application.
Before proceeding with your application for the Flexible Housing Withdrawal Account, it is essential to inform the Financial Institution of your intent during the application process. Additionally, ensure you obtain loan details verification from the Financial Institution. Your application must be submitted through the Financial Institution and must be accompanied by either a Withdrawal to Purchase/Build a House or a Withdrawal to Reduce/Redeem a Housing Loan. For a comprehensive list of Terms and Conditions, as well as the required supporting documents, please visit KWSP's website.