How to Buy a House with EPF Account 2 Money

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Most people agree that buying a house is probably one of the biggest purchases they’ll ever make. Understandably, there will be a wave of fear and an overwhelming doubt about property purchases. In this article, we will guide you on how to use EPF Account 2 Money to buy a home. Learn what documents you’ll need and the steps and criteria involved in using EPF Account 2 Money to purchase a home.

Before diving into the nitty-gritty parts, let’s look at the types of accounts that EPF has. Some people may not know that there are two types of EPF accounts (that’s okay, a lot of people aren’t aware of it).

How does the EPF Account work?

There are two types of EPF Accounts: EPF Account 1EPF Account 2. When an employee is eligible for an EPF contribution, usually between 9% and 11%, that percentage of their salary contributes to their EPF savings. Here, the funds will be divided between the two accounts. EPF Account 1 receives more; 70% of your salary contribution is transferred here. On the other hand, the remaining 30% is allocated to EPF Account 2. 

The main difference between these two accounts is that EPF Account 1 is meant for your retirement. Thus, you cannot use the funds before you turn 55. The latter is used for crucial miscellaneous purposes, such as to fund your home, pay for your children’s education, or cover medical expenses. 

Fund my residential home? How?

EPF

There are a few things you can do in order to finance your home; these include: 

  • Purchasing or building your first or second house. However, before you are able to use the funding for your second home, you are required to sell or dispose of the first house (and have evidence proving the sale, disposal or transfer of ownership).
  • Already bought your home? Not to worry. Your account funds can still be used to reduce the housing loan for your first or second home. Plus, you can also help your spouse reduce their loan as well.

However, you are not allowed to: 

  • Use the funds to renovate your home. Renovations can’t be accomplished with the funds in the account as they are considered unnecessary. 

There are several requirements when it comes to buying a property using the funds from EPF Account 2. You must pay the booking, downpayment, lawyer, and SPA’s stamp duty. Then, you are to gather the proof of purchase and show evidence beforehand.

Also, when we say ‘residential home’, we mean properties solely for residential use, such as, bungalows, terrace houses, apartments, condominiums, studio apartments, service apartments, townhouses, SOHO units or shop lots with a residential unit.

What can I withdraw?

There are two categories for withdrawal. One is individual, and the other is a joint withdrawal. The joint withdrawal here can apply to a spouse or a family member. So, this is how it works:

 

Withdrawal  Individual  Joint
Housing Loan  (Purchase price – Loan approved amount) + 10% of SPA price
Or entire Account 2 savings.
(Whichever is lower)
(Purchase price – Loan approved amount) + 10% of SPA price
Or the entire Account 2 savings of the applicant.
(Whichever is lower)
Self-financing Cost of purchase + additional 10% of the purchase price
Or entire Account 2 savings.
(Whichever is lower)
Cost of purchase + additional 10% of the purchase price
Or entire Account 2 savings.
(Whichever is lower)

Wait. Am I eligible?

Listed below are the eligibility criteria: 

  • Malaysians and non-Malaysians.
  • Below the age of 55 years old.
  • Have a minimum saving of RM500 in your EPF Account 2.
  • Have never made a withdrawal for housing beforehand or have made a withdrawal for housing, but the property has now been sold or disposed of.
  • The application must be made within three years of signing the SPA.
  • The property must be used for residential purposes only. 
  • The loan you have obtained must be either self-financed or from legitimate lenders.

What documents will I need?

Here are some of the documents that you will need to withdraw the funds from your EPF Account 2:

  • Form KWSP 9C (AHL) and Checklist, also known as the EPF Withdrawal Form
  • Sales and Purchase (SPA) original copy
  • Form KWSP 3 (Pindaan)
  • Copy of Identification Card
  • Passbook or bank account statement copy (for verification purposes)
  • Loan approval letter from your financier

Depending on how you are planning to finance, there may be additional documents that you need to have. This can be broken down into two sections – loans and self-financing.

Loans Self-Financing
First Home • Proof of Purchase

SPA (within 3 years from the application date) 

• Proof of Financing Housing Loan Approval Letter;

• Housing Loan Approval Letter + Housing Loan Agreement/Mortgage Form 16A/Deed of Assignment/Title Deed that is in member/spouse’s name

(only applicable if the approval of the loan has exceeded one year).

• Proof of Payment Receipt is at least 20% of the property price.

• Proof of Cash Purchase Developer Confirmation Letter

• Proof of Construction

Architect’s Certificate/Payment Request Letter for construction progress of no less than 20%;

OR

Certificate of Fitness – CF/ Certificate of Occupation – CO 

•  Proof of Relationship

Marriage or Birth Certificate is compulsory for joint withdrawal.

Second Home • Proof of Purchase

SPA (within 3 years from the application date) 

• Proof of Financing Housing Loan Approval Letter;

• Housing Loan Approval Letter + Housing Loan Agreement/Mortgage Form 16A/Deed of Assignment/Title Deed that is in member/spouse’s name

(only applicable if the approval of the loan has exceeded one year).

• Proof of Payment Receipt, which is at least 20% of the property price.

• Proof of Cash Purchase Developer Confirmation Letter

• Proof of Construction

Architect’s Certificate/Payment Request Letter for construction progress of no less than 20%;

OR

Certificate of Fitness – CF/ Certificate of Occupation – CO 

•  Proof of Relationship

Marriage or Birth Certificate is compulsory for joint withdrawal.

Proof of Disposal or Sale of Property

Such as the Ownership of Transfer Form KTN 14A or submission receipt issued by the Land Office. Proof of relationship must be submitted if the property is transferred amongst familial members;

OR

• Deed of Assignment and Letter of Confirmation from either party’s lawyer;
OR

• Deed of Assignment between the seller and buyer;
OR
• Title Deed in the new owner’s name and SPA between the seller and buyer;
OR

• Provide Real Property Gain Tax Form 5/5A AND SPA between the seller and buyer;
OR

• Proclamation of Sale from Administrator (Form KTN 16I) / Proclamation of Sale from Court (Form KTN 16F);
OR

• Bank confirmation if the property is sold via auction;
OR

• Transfer of ownership by Court Order and divorce documents;
OR

• A formal search from the Land Office and SPA between seller and buyer;
OR

• Confirmation letter by the local authorities for houses damaged by natural disasters;
OR

• Confirmation letter from the authorities that the housing project is failed or abandoned;
OR

• Deed of Revocation or Deed of Rescission in the case of the first house;
OR

• Cancellation Letter confirmation from the developer/lawyer;
OR

• Assessment Bills issued by local authorities on the new owner’s name and SPA between seller and buyer;
OR

• As for properties that have been damaged by fire, proof of letter has to be issued by approved authorities.

Documents collected. What’s next?

Certify your documents

When you are done collecting all the documents necessary, the next step is to get those papers verified. You will need to ensure that the right authority validates all the document copies – because not every person with authority is allowed to certify those documents. Examples of authorised persons that you may have to deal with are as follows:

  • EPF Officer (must be at least Grade 18/G5 and above or Officer at counter)
  • Malaysia Embassy Officer/High Commission/Consulate of Applicant’s Country in Malaysia
  • Applicant’s Employer
  • Head of Village (ketua kampung)/ Penghulu/ Penggawa
  • Justice of Peace
  • Recognised Advocates and Solicitors
  • Government Officers/Statutory Bodies/Government Agencies in Management and Professional Group
  • State Assemblyman
  • 国会议员
  • Head of Village Department and Security Committee (JKKK) / Head of Federal Village Department and Security Committee (JKKKP)

    Click 这里 to see the full extent of the list of authorised persons. 

Refer to the right panel banks

In order to receive direct payments into your account, you will have to check the EPF panel banks.

EPF submission

After ensuring everything is in order, you can then submit your application to your nearest EPF Counter. Alternatively, you can also choose to mail it to EPF. 

What payment methods are available?

EPF

Depending on where you are, the payments will be transferred to you in your preferred currency.

Local Payments Overseas Payments
If you are staying within the country, the payment will be made in Ringgit Malaysia (RM). For this, you must have an active account with the bank. Plus, your identification number has to match the bank records as well. 

Upon unsuccessful payment to your account, a Bankers Cheque will be issued to you.

Payment will be made to you in your choice of currency through the Foreign Demand draft. In the event that your preferred currency is not accepted, the payment will be made in US Dollars (USD) through a Foreign Demand Draft.

Registering for an i-Akaun

Setting up an i-Akaun is pretty straightforward. The steps are as follows:

  1. Visit the nearest EPF counter (the kiosk works too) and register for an account. A temporary username and password will be given to you. 
  2. 访问 KWSP’s official page and click “Members Login.” Log in using the temporary username and password given to you.
  3. Agree to the Terms and Conditions on the following page.
  4. Then, activate your account by entering your new and preferred choice of password.
  5. Lastly, go to the “Withdrawals” page and click “New Application.” And you can begin your application process!

What else can I do with my EPF Account 2?

There is another way to finance your house through the funds from the EPF Account 2 as well. This includes:
Boost your borrowing capacity

Having a higher borrowing power can be beneficial in many ways. This additional scheme, Flexible Housing Withdrawal, helps you to qualify for a higher-priced property than you normally would. When your lending bank evidence shows a higher income, you will subsequently be qualified to get a property loan that is higher as well. How to do this is to apply for a certain amount to EPF to your Flexible Housing Withdrawal Account – the money that goes here is counted as your income.  You should also submit your Housing Loan Balance Statement and Loan Redemption Letters during your application. Remember to apply for the Flexible Housing Withdrawal with Buy/Build Home Withdrawal or Reduce/Redeem Housing Loan Withdrawal.

How long does it take for the EPF Account 2 money to be deposited to me?

Good news! The deposit process is actually quite fast. Your application will be approved without delay if all your documents are in order. A text message from the board will be sent to you. Upon receiving the text, you will have to go to an EPF counter for thumbprint verification purposes. After that, it will take three weeks or 21 days from the day of your application submission to receiving the money in your account. That’s it!

结论

EPF money can be a convenient way to finance your home without affecting your financial situation. If you are not too sure about going about the application process, you can always go to the nearest EPF branch and speak to their staff on duty there. All the best in getting your first (or second) home!

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