To encourage Malaysians to have better quality of life as well as to ease the burden of owning a house, the Malaysian government has made provisions in Budget 2008 to allow the monthly withdrawals of the balance in Account II for home loan repayment.

In other words, Employee Provident Fund (EPF) contributors will now be able to make use of their Account II balances to assist them in the Monthly Home Mortgage repayments. For example, an average wage earner earning RM3,000 a month will be able to use his EPF to contribute an additional RM207 a month towards his home mortgage repayments.

To illustrate the above point further, here’s a breakdown on the calculations

Monthly Wage = RM3,000

Monthly EPF Contributions
a. Contribution from Employee (11%) = RM330
b. Contribution from Employer (12%) = RM360

Total Monthly Contribution to EPF (a.+b) = RM690

Hence, Monthly Account II allocation is RM207 (30% of the total monthly contributions)

As such, new and current home owners stand to benefit as follows:

• Qualifying for a higher Home Loan Quantum as the qualifying monthly Mortgage repayment is RM1,207 instead of RM1,000 (Based on the rule that monthly mortgage repayments should <1/3 of your monthly salary)

• Ability to purchase a property at a much higher price range. Current home owners may consider trading their current home for a bigger one

• Or for current home owners on Flexible Home Loan, using the monthly EPF witdrawals to boost the monthly repayments translates to lower interest charges and overall lower cost of ownership.

On the surface, this policy looks like another win-win policy for the people and the real estate industry. However the implementation of this policy from the EPF statutory body leaves a lot to yearn for.

Quote from The Star:
• To ease the burden of home loan repayment, the Government will allow EPF contributors to make monthly withdrawals from the balance in Account 2. The scheme will be effective 1 January 2008 and is for the financing of one house. This is a major move, which will benefit 5 million active EPF contributors. This scheme will enable contributors to own better houses than they could otherwise afford as well as lessen their monthly financial obligations. This scheme will make available up to RM9.6 billion annually for the purchase of houses.

Tags: property, properties, home, Malaysia, Budget 2008, Employee Provident Fund, EPF, Account II, home loan, mortgage, repayment, real estate, house, housing