Many of us grew up dreaming of owning a large, luxurious home and living a prosperous life. However, reality often paints a different picture. After graduating from university and stepping into the workforce, many find that property prices continue to rise while their salaries remain stagnant. The dream of owning a big house starts to seem unattainable.
But is owning a home truly an unreachable goal? Not necessarily! To help Malaysians achieve financial security during retirement, the Employees Provident Fund (EPF) allows its members to withdraw from their EPF Account 2 to purchase a home.
That said, EPF is primarily meant for retirement savings, so is using EPF Account 2 to buy a home a wise decision? This article will analyze the pros and cons and provide a step-by-step guide on how to apply for an EPF Account 2 withdrawal for home purchase.
Are There Any Downsides to Using EPF for Home Purchase?
1. Reduction in Retirement Savings
EPF is designed to ensure financial security after retirement. Withdrawing from Account 2 for a home purchase means reducing your retirement fund, which could lead to insufficient savings in your later years.
2. Losing Out on Compound Interest
EPF offers an annual dividend rate of approximately 5%-6%. Withdrawing money early for a home purchase means missing out on these potential earnings. Over the long term, the power of compounding could result in significant financial growth. Before withdrawing, consider whether your property's potential appreciation outweighs the lost EPF dividends.
Benefits of Using EPF to Buy a Home
1. Own Your Home Sooner
With inflation driving up property prices annually and stricter bank loan requirements, many Malaysians struggle to afford their dream homes. Given that EPF dividends may not keep pace with rising property prices, withdrawing from EPF Account 2 can help cover the down payment or mortgage payments, easing the financial burden and allowing you to secure a home sooner.
2. Free Up Cash Flow for Other Investments
Reducing your monthly housing loan burden can improve your financial flexibility. The money saved on monthly repayments can be redirected to enhancing your quality of life or investing in high-value assets such as stocks or gold.
How to Apply for EPF Account 2 Withdrawal for Home Purchase
Eligibility Criteria
To apply for EPF Account 2 withdrawal, you must meet the following conditions:
Malaysian citizens and non-citizens are eligible.
Must be under 55 years old.
Must have at least RM500 in EPF Account 2.
The property must be for self-occupation.
Must have an approved loan from a recognized lender or self-financing proof.
If a previous housing withdrawal was made, you may apply again if the previous property has been sold.
How Much Can You Withdraw?
EPF allows withdrawals in two ways:
Individual Withdrawal – If you are the sole buyer.
Joint Withdrawal – If purchasing with a spouse or immediate family member.
The amount you can withdraw depends on your financing method (bank loan or self-financing).
Documents Required for EPF Account 2 Withdrawal
General Documents:
KWSP 9C (AHL) Form
KWSP 3 (Pindaan) Form – Required for postal submissions or failed fingerprint verification
Copy of Identification Card (IC)
Non-MyKad holders must present the original IC for verification.
Sales and Purchase Agreement (SPA) – Must be within three years from the application date.
Bank Account Passbook or Statement Copy – For verification purposes.
Note: Document requirements may differ based on whether you are buying your first or second home.
Additional Documents for First Home Purchase:
If purchasing with a bank loan:
Proof of Purchase – Sales and Purchase Agreement (SPA) dated within the last three years.
Proof of Financing:
Housing Loan Approval Letter.
If loan approval is over a year old, submit the Housing Loan Agreement or Transfer Agreement & Property Title under the buyer/spouse’s name.
Proof of Relationship (for joint purchases):
Marriage Certificate or Birth Certificate.
If self-financing:
Proof of Purchase – SPA dated within the last three years.
Proof of Payment – Receipt showing at least 20% of the property price paid.
Proof of Cash Purchase – A confirmation letter from the developer with property details.
Proof of Construction:
Architect Certificate or proof of at least 20% construction progress.
Certificate of Fitness (CF) or Certificate of Occupation (CO).
Proof of Relationship – Marriage Certificate or Birth Certificate.
Final Thoughts
Withdrawing from EPF Account 2 to purchase a home can be a strategic financial decision if planned carefully. While it allows you to secure a property sooner, it also reduces your retirement savings and potential investment returns. Before making a withdrawal, weigh the long-term benefits of homeownership against the potential losses in EPF dividends.
If you meet the eligibility criteria and are confident in your financial planning, EPF Account 2 withdrawal can be a valuable tool in achieving your dream of homeownership!