3 Ways To Use Your Provident Fund To Finance a Home
01 Aug 2016
Few provident fund account holders are aware that they can withdraw from their PF account in order to pay for a house or real estate related investment.
It's good news that as of April 20th 2016, the Government has revised the provident fund norms, allowing PF holders to withdraw the complete amount from their PF account before the retirement age.
Though a provident fund is a financial security for after retirement, it can also be used towards paying for a home or repaying a home loan.
There are few standard criteria that allow you to withdraw money from your PF account for funding a home purchase:
For the Purchase of a House or Plot
You can use the withdrawal facility of your provident fund account to finance a home or buy a plot of land. You can also withdraw money from the account if you wish to build a residential property on a piece of land owned by you or your spouse. However, you can only withdraw money from your provident fund after 5 years of contributing to the account. Moreover, the amount you can withdraw is restricted to 24 months basic salary and DA.
For Renovations and Home Improvements
The provident fund withdrawal facility allows you to finance the renovation of your house under the following conditions:
It should be at least 5 years since the completion of the construction of the property. Renovation should be the only reason for which you have availed the amount. The amount that you are allowed to withdraw is restricted to 12 months’ basic salary and DA.
For the Repayment of A Housing Loan
You can use your provident fund to repay the outstanding balance of a home loan. You can only withdraw an amount that does not exceed 36 months of your basic salary and DA. This amount can be used to repay loans from specified and regularized entities like the State Government, registered co-operative society, state housing board, nationalized banks, public financial institutions, municipal corporation, or any development authority.
As long as you meet these criteria, you can avail of the new provision – one that definitely brings your home buying dream much closer!