How To Use Provident Fund To Buy A House [Updated 2020]

do you want to buy a home? are you falling short of money and thinking about how to buy a home? do you want to take a loan? what about the equated monthly installment (emi)? how much emi can you pay? are you wondering if there are other ways to finance your purchase?

acquiring a home is on each family’s top priority list. whether or not you're reaching to board it and build recollections or rent it out and reap the advantages, finance in assets is an all-time dream for every indian citizen. to make it comes true, the central government has stepped up with various schemes to create it easier for the public to buy a home.

one such spectacular move introduced by the ministry of labour and employment is the employee provident fund scheme. 

what is the employee provident fund?

employee provident fund (epf) is one of the foremost traditional and widely used investment schemes by the salaried category in india. the advantages of epf square measure extended to all or any institutions with 20 or additional staff. an employee starts his contribution to the pf fund once he joins a corporation as a full-time employee at a particular organisation. 

the contributions from the employee are credited every month in their epf account. employers and staff each contribute 12% each of wages in epf. the tax-free interest and also the maturity price guarantee sustained growth to your hard-earned cash. they are even supposing it's hugely suggested that the pf continuing for an extended amount of your time, epfo members allowed to withdraw the whole quantity if they continue to be idle for quite 2 months after they are unemployed and not a part of any organisation.

the govt introduced this scheme of employee provident fund to finance you to buy a home in support of the “housing for all” theme. according to this scheme, monthly installments are often paid against your home equity credit from your provident fund deposit. 

want to know how to buy a home by employee provident fund? 

you currently have the choice of buying a home, constructing property on your land, or renovating it with the assistance of funds accumulated in your provident fund. as per the employee provident fund scheme, you're eligible to utilise 90% of your pf withdrawal for a house purchase when uniformly contributive to that for a span of 5 years. 

on the contrary, you're conjointly eligible to avail the loyalty profit throughout the unfortunate incident of permanent incapacity, though you haven’t completed an operating amount of 12 years. as a way, because the housing sector thinks about, browse on to urge a more in-depth insight into. however, the provident fund scheme will assist you to buy a home.

once you check your eligibility, you'll be able to avail associate degree quantity similar to 3 years of your basic wage. as approved by the ministry of finance, associate degree interest of 8.65% is often availed on the entire provident fund deposit, extending this profit to around four large integer indian voters within the operating sector. 

did you know that you can withdraw up to 90% of your epf balance or repay a loan using the amount in your employee provident fund (epf) account to buy a home?

an epf member can withdraw 90% of his employee provident fund (epf) balance to buy a home. the new epf scheme called ‘employees provident fund (fourth amendment) system scheme, 2017 is effective from 12 april 2017. to utilise 90% of their employee provident fund quantity, the employee ought to have a minimum of 3 years of employment under the scheme and should have a minimum of rs. 20,000/- in their pf account. 

fulfilling the wants, the employee provident fund body can then sanction the number together with the principal and interest or the acquisition price of the property, whichever is lower. below this class, an employer will solely create one pf withdrawal for house purchase of employee provident fund to buy a home throughout his entire employment.

to encourage and support the central government’s ‘housing for all by 2022’, the government amended to the existing epf withdrawal rules for pf withdrawal for a house purchase. the pf home loan rules, however, don't encourage the secondary market or merchandising transactions of land properties. epfo is creating the payments on to the co-operative society, government, central government, or any housing agency below any housing theme, or any promoter or builder, in one or additional installments because of the case perhaps.

so, how does epf help you to buy a home?

  • an employee can withdraw 90% of the accumulated epf balance. it includes both employee and employer contribution plus interest acquired on the total amount in the account as pf withdrawal for a house purchase

  • you can use the money to buy a home, construct a house, or buy a plot of land.

  • you can even use it to pay equated monthly installment (emi) of your home loan to buy a home.

  • epfo will pay the amount directly to the seller such as central government, state government, co-operative society, or even a private builder, promoter or developer.

  • if you are an active member of epf for the past three years, you can withdraw the money in your pf account to buy a home. before the amendment became effective, you had to be an active member for more than five years.

  • avail this facility if you have a fund shortage to buy a home or pay your home loan emis.

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  • you must be an epf member contributing to your account for more than 3 years now.

  • you can withdraw from your epf account only to buy a home, a plot or construction of a house is a registered society with more than ten members.

  • you can also withdraw if you want to buy a home or buying a land/plot to construct a house from the government, housing agency, developer, or promoter.

  • you can withdraw money to buy a home/ plot jointly with your spouse. in this case, if your spouse must also be an epf member.

  • you can use pf withdrawal for home loan to repay emi.

  • the minimum epf balance in your account should not be less than rs 20,000. in case of joint ownership, the epf balance in your account and your spouse’s account should be more than rs 20,000.

  • you can get pf withdrawal for a home loan only once from your epf account.

  • you cannot get pf withdrawal for a home loan money to buy a home in the secondary market as a resale transaction.

procedure to withdraw money from your epf account

if you are eligible for pf withdrawal for a home loan from your account, follow the procedure given below:

  • apply to the commissioner of epfo to get the pf account number, the name of the epf member, the balance in epf as on, and the details of the provident fund account for the last three years for pf withdrawal for a home loan.

  • the commissioner will issue a certificate with all the details to the bank or housing society that is mentioned in your application.

  • in the application, you must also declare the balance in the pf account and confirm that it is more than rs 20,000.

  • if you want pf withdrawal for a home loan jointly to buy a home

  • submit the certificate to the government, registered cooperative society, housing agency, builder and promoter.

  • alternatively, you can take a print of the passbook from the epf website to get to know how much money is accumulated in your pf account.

after receiving your application, epfo will directly pay the amount withdrawn to the bank or cooperative housing society.

how much will epfo pay?

the amount equal to 90% of the employee’s share, employer’s share plus interest accrued or the cost of the property, whichever is lower. 

in case of pf withdrawal for a home loan

  • along with the form given above, you must also apply to the commissioner of epfo authorising him to pay emis to the lending bank or financial institution.

  • the application contains the details of the epf amount, the epf and loan account number, name of the bank or lending institution, address, and so on.

  • the lending bank or financial institution confirms that the details given in the application form are correct.

  • once getting the confirmation, epfo will disburse the eligible epf amount towards the pf withdrawal for a home loan repayment to buy a home.

what if you don’t have enough balance for pf withdrawal for home loan?

if the amount in your epf account is not sufficient to meet the eligibility of pf withdrawal for a home loan emi, you must pay the remaining amount to the bank or lending institution. epfo will pay money to the bank till the time there is enough balance in your account, and your epf account is active.

your application should mention that you are solely responsible for repaying all the dues like interest and the balance of the loan amount in case the epf account becomes inactive, or there is insufficient money.

if your allotment is canceled, then the amount withdrawn should be paid back into the epf account within fifteen days of the cancellation of the allocation. the epfo will credit your account once they receive the money back.

the purpose of the employee provident fund is to accumulate money regularly that can be used by the member post-retirement. therefore, if you withdraw money from your epf account, you will be left with very little money to support you after you retire.

ensure that you plan for your retirement needs before you decide to withdraw money from your epf account. also, applying for pf withdrawal for an epfo home loan works out much cheaper as there are tax deductions when you repay the loan.

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by: lotus tech & govi