Home Loan Interest Rates Latest Update: After the RBI repo rate hikes, the home loan interest rates have gone up in the recent past. Several banks have also increased their interest rates for both the existing and new borrowers. The increasing interest rate on home loans led to the discussions of what should borrowers do to reduce their interest payouts against their outstanding loan amount. One of the options they can explore is to prepay their home loans either fully or partially using their Employees Provident Fund (EPF) amount.
Can you withdraw EPF Balance for repayment of home loan?
As per Section 68BB of the EPF Scheme, you can withdraw the EPF amount for repayment of your home loan. However, the home must be registered individually or jointly in the name of the PF member. The home loan applicant will have to have a minimum of ten years of PF contribution record. The withdrawn PF amount will not be not taxed after the completion of continuous service of five years.
How to withdraw EPF Balance for repayment of home loan?
Before going ahead, you need to check all the aspects carefully. If you are in the early stage of your career, then you can use the PF corpus to repay the home loan because you have a long period at hand to replenish the fund in your EPF account.
Moreover, if the home loan interest is higher than the EPF interest, you can use the EPF corpus to repay the home loan and save money towards interest outgo. If the interest on EPF is higher or equal to the home loan interest, you may avoid disturbing your EPF corpus.
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When to withdraw PF fund to clear home loan?
Withdrawal of PF amount should be used as a last option. If you are in a temporary financial situation and expect to come out of it in the near future, you may use the PF corpus. But if you are unsure when your financial problem will get over, you may first explore other options like increasing the loan tenure to lower the EMI or using FDs to manage repayment. The PF amount is meant for your retirement planning, and you must keep it safe for that time and should not use for home loan.
