How To Get a Home Loan Against Your PF

Getting a Home Loan just got easier! Now you can pledge the amount accumulated in your Employee Provident Fund to buy your dream home.

From next year, you will not just be able to get a Home Loan against your EPF account but will also be able to pay EMIs from the account.

“We are working on a housing scheme for the subscribers of the Employees’ Provident Fund Organisation (EPFO). We can launch the scheme in 2017-18 after introduction of our online service like settling PF withdrawal claims by March-end,” V P Joy, Central Provident Fund Commissioner at EPFO told the Press Trust of India recently.

The government body said this scheme was aimed at helping the working generation buy affordable homes while not stretching their salaries too much.

The Home Loan will be given in a tri-party agreement between the applicant, the bank or financial institution granting the loan, and the EPFO that will permit the applicant to take out a loan on the PF account.

Basically, you will be able to use your PF account as collateral against your Home Loan. You can also pay your EMIs from your PF account.

The scheme is a follow up of a similar proposal brought out in August 2016. The Labor ministry said the scheme was in line with Prime Minister Narendra Modi’s dream of ensuring housing for every Indian by 2022.

“To further encourage members to continue their PF membership throughout their working life we are actively considering a proposal to assist PF members in getting a house by pledging their present and future PF accumulations. The members would be free to procure a house wherever they want,” Dattatreya, the Union Minister of State for Labour and Employment told the Press Trust of India.

Want to check how much you have in your PF account?

Withdrawing Money from Your PF Account

The scheme comes soon after the EPFO announced a host of online services like the Aadhaar-linked, UAN-based withdrawal process, where one would not need an employer’s signature to transfer the money from their PF accounts.

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You can now withdraw your PF money by just filling out a UAN-based form 19 if your UAN is activated and linked to your Aadhaar card and bank account number.

The Age Advantage

There is a certain age advantage when it comes to PF withdrawal. In fact, the older you are, the more you can withdraw from your PF account.

The government allows anybody aged above 54 to withdraw 90 percent of the balance money including the interest. If you plan on retiring before 55, you can withdraw the entire amount and close your PF account.

Tax Effects

PF is not taxable but if you withdraw your PF before completing a minimum of five years of service then you will have to pay Tax Deducted at Source (TDS). This was introduced by the government to stop premature withdrawals.

However, if you’ve not gotten a job within two months of your resignation, you can withdraw your PF amount.

The new Home Loan scheme is just another reason for you to hold on to your PF account. Not only will the money you use to refinance your home be tax-free, you’ll also get a whole host of tax benefits on your Home Loan!

Tax Benefits on Home Loans

There are a host of tax benefits on getting a Home Loan. Let’s run you through some exciting ones:

• Interest Rate Deductions

Up to Rs. 2,00,000 of the interest component of your EMI is exempt from tax every year. You must be the owner of the home to be eligible for this benefit. If you are letting the house out for rent, the entire amount is exempt from tax.

• Principal Deductions

Under Section 80 C of the Income Tax Act, you can claim a maximum deduction of Rs. 1,50,000 per annum on the principal amount of your Home Loan.

• Registration and Stamp Duty Deductions

Under section 80 C, you can also claim a benefit on registration and stamp duty. This is only applicable for the year you paid these charges.

• First Time Home Owner Benefits

If you’ve taken a Home Loan and this is your first property, you can claim a reduction of up to Rs. 1,50,000 on your principal amount under section 80 C and a reduction of Rs. 50,000 on your interest payment under Section 80 EE.

Sounds great, doesn’t it? Take a look at some of the most popular Home Loans on the market below:

• SBI Flexipay Home Loan

The SBI Flexipay Home Loan allows you to pay only the interest component of your EMI for 60 months. You can start repaying the principal later. You can borrow up to Rs. 10 crore for a tenure of 30 years at a floating rate of 9.35%. Get it approved in 5 days and get your paperwork done in the comfort of your home.

• Indiabulls Home Loan

The Indiabulls Home Loan allows the applicant to borrow up to Rs. 3 crore for a fixed rate of 9.95% for the first three years and 10.40% floating rate thereafter. Decide on an EMI amount that suits you and pay off your loan in a maximum of 30 years. Balance transfer feature is available on this loan.

• PNB Housing Finance Home Loan

The PNB Housing Finance Home Loan is available at a floating interest rate of 9.55% to 9.80%. You can get the loan for all kinds of home requirements like construction, extension, or just mere improvement. The application process is really simple and you have easy repayment options along with a quick approval process.

• ICICI Bank Women’s Special Home Loan

ICICI Bank offers a special floating rate of 9.40% to 9.65% to women applicants. You can borrow up to Rs. 10 crore and pay off the money over a long 30-year tenure. There are no part-payment fees and no guarantor is required for this loan. The best part? Get the loan approved on the same day you applied!

• HDFC Ltd Home Loan

This is also a women’s special loan that allows the applicant to borrow up to Rs. 10 crore for a floating interest rate of 9.40%. The loan can be taken to purchase resale homes as well. If you are constructing a new house, count on this loan to come in handy. There’s a pre-approved loan scheme available and if you do qualify, you could negotiate for a lower interest rate. There is also a special Home Loan for agriculturists and government employees.

A home is a great asset. In certain cases, it might make more sense to pay an EMI on your Home Loan instead of paying rent. Also, there’s a sense of security that comes with living in your own house, isn’t there?!

Check This: Should I Buy A House Or Continue Staying On Rent?

Ready for that loan?