Tuesday, May 6, 2008

Withdrawal of EPF money for housing loan monthly installment

Since 1 January 2008, EPF a.k.a. KWSP members are also allowed to withdraw their money from EPF Account II to pay for their monthly instalments of a housing loan, which has been taken up for the purpose of buying or building a house.

Unlike the withdrawal of EPF money to reduce housing loan which the money is directly made payable to the bank, this withdrawal for housing loan monthly installment can be banked in to your personal savings account and its usage is just up to you, if your housing loan does not have the non-performing (NPL) status. Otherwise, the money will still go to the bank as if the withdrawal to reduce housing loan. In anyway, you should not let your housing loan to fall into NPL status, because the interest rate will be high, and the bank might put your house on auction to recover the defaulted loan.

I would advise you to opt for the withdrawal of EPF money to reduce housing loan instead of this one if you intend to use the money for your housing loan. This is because that method will directly reduce your loan principal in a lump sum and can save you interest as well as reduce the loan tenure period, but this method might not do the same for you and you might end up saving nothing.

I would advise you to use this monthly withdrawal of EPF money for purposes like the following:

  • to settle out your outstanding credit card debts. This is because the interest rate is high, and soon you will lost your credit card interest free period if your debt is not settled.
  • for purchase down payment or settle the loan of your car. This is because the car loan interest is calculated differently, and is generally higher than your housing loan. I have already written an article about this.
  • for house renovation, wedding, birth of child, etc. This is because the interest rate for personal loan is generally higher than your housing loan.
  • for investment in 2nd house, business turnover, or investments that you believe the return is much higher than EPF dividend.
You should continue to serve your housing loan monthly installment in time every month, because this withdrawal could be cancelled by EPF if you don't do so. And if you don't intend to use the money, it is wise to keep your money with EPF to earn the dividend instead of withdrawing it, unless you foresee that the EPF dividend in the future would be even worse than the bank savings interest.

This withdrawal is eligible to:
  • A Malaysian citizen
  • A permanent resident in Malaysia
  • An expatriate who joint as member of EPF before 1 August 1998
To apply for this withdrawal, you must have minimum savings of RM600 in your EPF Account II and have not reached 54 years of age. The minimum withdrawal amount is RM100 per month for a period of not less than 6 months, and the maximum monthly withdrawal amount must not exceed your monthly loan repayment amount.

The withdrawal process is pretty much the same as the withdrawal to reduce housing loan. You just need to complete the Form KWSP 9P (AHL) and submit it together with the required supporting documents to the nearest EPF office. You must go to the EPF office by yourself because your thumbprint is required to verify your application.

The required supporting documents are:
  • Your MyKad
  • Your bank savings account book or statement
  • Photocopy of both side of your MyKad, printed on the same page of A4 size paper
  • Photocopy of the pages containing your bank account details (including your full name, IC number, bank account number, branch of bank, etc.) of your bank savings account book or latest bank statement
  • Letter from the bank confirming your housing loan details and the latest outstanding balance. You have to apply for this letter from your bank.
During the tenure period of this EPF Account II withdrawal arrangement, you cannot sell your house, make full settlement to your housing loan account, default to Non Performing Loan, or empty up your money in EPF Account II for other purposes, such in the case of Disability Withdrawal, Death Withdrawal or Leaving-Country Withdrawal. Otherwise, EPF will just cancel the monthly payment to you.


joseph aldeguer said... Reply To This Comment

Great article.

TaMaMa@_@ said... Reply To This Comment

Great content.
Sharing here, it can also boost your reported monthly income to qualify for a higher value loan
Source: http://loanstreet.com.my/learning-centre/epf-money-housing-loan#sthash.lLdXCaMh.dpuf

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