EPFO : Having a personal home is a dream shared by all. To achieve this dream, numerous individuals seek assistance from home loans. The duration of a home loan is relatively lengthy. As a result, a significant portion of the monthly earnings of working individuals goes towards covering the loan EMI. In this scenario, some individuals also intend to settle the home loan using funds from the Employees Provident Fund (EPF).
If you intend to pay off your home loan using EPF, there are a few important factors you need to consider. The EPF is typically one of the schemes that offers the highest interest rates. However, if the interest rate on your mortgage is greater than the rate you’re receiving on your EPF, you can utilize this sum for the loan pre-payment. For instance, the current interest rate for EPF stands at 8.25 percent.
Simultaneously, the majority of banks are providing home loans with an interest rate ranging from 8.5 to 10 percent. If your home loan interest rate is 9 percent or higher, then you should think about pre-paying the loan using your EPF funds.
EPFO permits the withdrawal of up to 90%
If you’re youthful and just starting your career, you may choose to repay your home loan with EPF funds (EPF Withdrawal procedure), since you’ll have ample time to rebuild your retirement savings afterward. EPFO permits the withdrawal of up to 90% of the deposited sum to settle a home loan. Under the Home Loan Repayment Scheme, EPFO members can use their account to pay the EMI. It is advisable to refrain from withdrawing the total amount from EPF. This may disrupt your retirement strategy.
interest rate of 8.25 percent
At present, it is receiving an interest rate of 8.25 percent. The greater the amount you take out from EPF, the larger the effect it will have on your retirement savings.