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.

Withdrawal of EPF money to reduce housing loan

Most EPF a.k.a. KWSP members know that they can widhdraw the money in their EPF Account II for the purpose of reducing or settling the balance of their housing loan taken from a financial institution approved by EPF for the purchase or construction of a house in Malaysia. This can help them to settle their housing loan in shorter period and save on the interest payable to the bank, at the trade-off of losing the annual dividend payable by EPF on that amount of money.

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 RM500 in your EPF Account II and have not reached 55 years of age.

The withdrawal process is pretty much the same as the withdrawal made to partially finance the purchase of new house. You just need to complete the Form KWSP 9C (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
• Photocopy of both side of your MyKad, printed on the same page of A4 size paper
  
• Letter from the bank confirming your housing loan details and the latest outstanding balance. You have to apply for this letter from your bank.

Previously this kind of withdrawal can only be done at the frequency of every 3 years. Since 2007 the eligible frequency has been reduced to once per year. I have done this withdrawal for 2 times, and each time I got the money within 2 weeks upon submission.

The money is made payable to the bank for your housing loan account, and will directly use to reduce your loan principal. You can hardly withdraw it for other usage, and by right, you shouldn't do that too. If you intend to make use of the money otherwise, read my other article about EPF withdrawal which enable you to do that. Your housing loan statement for all subsequent months after that should show that the interest charges have been reduced.

Is it a wise move to perform this withdrawal of EPF money to reduce your housing loan? The answer is yes if you foresee that the dividend from EPF in the coming years is probably lower than the interest rate of your housing loan. Otherwise, it might not be a wise choice, as keeping your money to grow in your EPF Account II is more beneficial than reducing the interest payable for your housing loan account.

Upgraded e-Connect online service for Great Eastern Life Assurance Malaysia

I just noticed that the website of Great Eastern Life Assurance Malaysia at http://www.lifeisgreat.com.my/ has a new look and feel now. Their e-Connect service which allows policy holders to view their policy information on-line has also been upgraded.

Now, more information is displayed to the policy holders, the dollars and cents are more transparent. The upgraded system shows the break down of all the benefit details, how much installment premium was charged to each of the benefit and rider. Detailed investment link fund information including the units possessed and fund value. It also shows the break down of the current surrender value and policy loan value of the policy.

Good job! Great Eastern Life Assurance Malaysia. Your effort in getting closer connection with policy holders is very much appreciated. And yes, I also appreciate on the special bonus that you've credited into my policy account recently.