Use your EPF to pay for your Home Loan or Tuition

Your EPF account isn't just a retirement fund: it can also be used to aid in debt management by helping you pay for your home loan, school tuition, or investments.

We all know the importance of having an Employees Dividend Fund ( EPF) account: That special fund that can only be accessed after retirement. But besides acting as a retirement nest egg did you know that your EPF savings can be used to help you with some of your debt?

The mechanics

Every EPF account is broken down to Account 1 and Account 2. Every month 70% of your EPF contribution is allocated to Account 1 while the remaining 30% goes to Account 2. Account 1 is off limits until you reach the age of retirement but you can tap into your funds in Account 2 for various investments such as buying a house or paying for a higher education course.

Buying a house

You can withdraw from your EPF to service a home loan if you’re purchasing residential property. There are many circumstances and conditions for the maximum amount allowed but the withdrawal guideline is either 10% of the house price or all of Account 2. To qualify, you would need to provide the Sale and Purchase Agreement which is not more than 3 years from the date of application among other related documents as listed in EPF’s website.

Settling existing home loans

If you have an existing house loan, you can lighten the load with your EPF savings. You could either choose to settle a lump sum payment (capital repayment) or opt to have EPF service the monthly repayment. For a lump sum payment, the amount depends on how much you have available in account 2 or the total balance of your loan whichever is lower.

For monthly repayments; you will also only be allowed to take out the available balance from account 2. Calculating how many payments you can make with the available balance and fill in the form accordingly. EPF will block the entire amount and make the payments every month automatically. However, this means that the full amount is removed from your EPF account and you will not be receiving any interest from EPF on it. As such; many customers prefer to take out lump sum amounts and have their banks convert it into advance payments.

To perform either withdrawal method, you will need to request for a balance statement from your bank. The statement is specifically for EPF purposes and will contain details of the property as per your Sale and Purchase Agreement as well as your loan details. The amount withdrawn from EPF will then be credited directly to your home loan account. Your Account 2 funds can also be used to reduce/redeem a housing loan on behalf of a spouse or immediate family member. All withdrawals are subject to a minimum withdrawal of RM500 or all of Account 2 savings.

For education purposes

If you have an education loan with PTPTN or MARA, you can choose to repay in full or in part using your available balance in Account 2. Similar to housing loan repayments; you will need to apply for a balance report from PTPTN or MARA and submit this along with the relevant documentation as required by EPF. This can be done by both the former student or his/her parents.

Current and future students who did not qualify for PTPTN or other loans can also fall back on the EPF of their parents to finance tuition fees. You can opt to withdraw once per academic year or each semester. Be aware though that an interview is required every time you submit an application for withdrawal. Make sure you do your homework before you apply. Swing by the KWSP website to confirm if the education institution and course you are enrolling your child with is recognised for EPF withdrawals. The amount you are able to withdraw will be limited to either the amount of fees or the amount you have available in Account 2, whichever is lower.

These are just a few options that are available to as an EPF member. You can visit the KWSP website for a full list of withdrawal purposes.


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