EPF Account 2 can be used for buying a home. Should you?

EPF Account 2 can be used for buying a home. Should you?

I withdrew my EPF Account 2 for my first home

Yes, for my first ever property, I used the amount I have in Account 2. It helped because I did not save much and thus, the money comes in handy for the downpayment of 10 percent. It was just a property of RM123,000 but at the time, I have only worked for 5 years. So, the actual amount I have in Account 2 is definitely very small. From the total, 30 percent goes into Account 2 while 70 percent goes into Account 1. That was then, now, it’s 15 percent. We also have an Account 3 which is 10 percent of our the total contribution.

So, what is my advice? My advice is at the end. Let’s listen to what I found in an Article in housingwatch.my

Is It Worth Using EPF to Buy a Home?

As a new homeowner in Malaysia, you may think it is a good idea to use your EPF (KWSP) Account 2 balance to purchase a house, and it is a good idea in the case of many people. I financed mine as a downpayment, and without it, I am sure I would have never been able to buy a house as soon as I did. However, just as with any financial choice, there are advantages and disadvantages to take into account.

Pros:

• Reduces upfront burden: Coming up with 10% of the property price for the downpayment can be tough. Using your KWSP savings can ease that pressure.
• Lower monthly commitments: You can also withdraw to reduce your house loan balance, which helps lower monthly instalments.
• Access to your own money: EPF savings are your hard-earned funds. Using them for a home — an appreciating asset — can be a wise long-term investment.
• Available for joint buyers: You and a family member can combine withdrawals to boost your home financing power.

Cons:

• Reduces retirement savings: Every ringgit you withdraw now is a ringgit less for your retirement. If you don’t top it up later, your future nest egg may be smaller.
• Dependent on EPF balance: If your Account 2 doesn’t have much saved yet, the withdrawal might not make a big difference.
• Market risks: If you buy property at a high price and values drop, you may not get good returns — unlike EPF’s relatively stable annual dividend.

Refer here for the full article with a lot more questions answered: Article in housingwatch.my

It’s best to leave Account 2 alone, if you ask me

We should save enough for downpayment for our first property. If we do not have enough downpayment but we absolutely need to buy a property, then change the price target of the property we like to buy. Buy smaller, buy further, buy less branded products. The reason I say so is because the amount we have in Account 2 will be small and the mortgage loan interest is also lower than the dividend we can get from our savings inside EPF. Imagine taking out money which could earn 5.5 percent dividend every year and put it into a housing loan where the rate is maybe 4.2 to 4.5 percent? Hope this explains why I think buying a property with saved downpayment is better than withdrawing our EPF savings.

Plus the fact that whatever we are withdrawing, that amount will double in 13 years if EPF continues to pay 5.5 percent per year. RM15,000 which we withdraw today as downpayment is actually going to become RM30,000 in 13 years’ time. However, if we really need that amount inside Account 2 as downpayment, then do withdraw yeah. Buying a property now also meant we could enjoy capital appreciation for the property too.

Happy investing.

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