Most Malaysians have more money in their EPF account than in their bank account. For a 35-year-old earning RM 6,000/month, the cumulative EPF balance is typically RM 150,000-250,000. Yet when it comes time to buy an investment property, many stretch to scrape together a 10% down payment from savings while their EPF sits untouched — because they either do not know they can withdraw it for property, or they are unsure whether they should.
The answer is not as simple as "yes, withdraw" or "no, keep it." It depends on the numbers: what your EPF is earning versus what the property will cost you without those funds. This post covers the mechanics of EPF withdrawal for property, the exact process, and the financial analysis that should drive your decision.
EPF Property Withdrawal: The Basics
The Employees Provident Fund (KWSP/EPF) allows members to withdraw from Account 2 for property purchase under Section 5B of the EPF Act 1991. Under the EPF Act 1991 (Act 452), this withdrawal right is a statutory entitlement for eligible members.
Following the Budget 2026 EPF Flexible Account restructuring, EPF contributions are now split across three accounts:
- Account 1 (Akaun Persaraan): 75% of contributions — locked for retirement, restricted withdrawals
- Account 2 (Akaun Sejahtera): 15% of contributions — for housing, education, and health withdrawals
- Account 3 (Akaun Fleksibel): 10% of contributions — flexible withdrawals at any time
Property withdrawals come from Account 2 (Akaun Sejahtera), not Account 3.
There are two distinct withdrawal categories:
Category 1: Purchase or Construction of a House
This applies when you are buying a property (from a developer or sub-sale) or building a house on your own land.
What you can withdraw: The difference between the property price and the financing amount — effectively covering your down payment and related upfront costs.
Maximum Withdrawal = Purchase Price − Financing Amount
Or your Account 2 balance, whichever is lower.
Example: You are buying a RM 500,000 property with 90% financing (RM 450,000 loan). The difference is RM 50,000. If your Account 2 has RM 80,000, you can withdraw up to RM 50,000. If your Account 2 has RM 35,000, you can withdraw RM 35,000.
Key rule: The purchase/construction withdrawal (Category 1) is primarily intended for the member's own residence. For a first home, this is straightforward. For second and subsequent properties, only the loan reduction category (Category 2) applies — you cannot use Category 1 to fund the purchase of a non-first home. This is a common source of confusion: EPF housing withdrawal is not an unlimited tool for building an investment portfolio.
Category 2: Reducing or Settling a Housing Loan
This applies when you already have a property with an outstanding loan and want to use EPF funds to reduce the principal.
What you can withdraw: The outstanding loan balance, or your Account 2 balance, whichever is lower. Minimum withdrawal is RM 500.
Frequency: Once every year from the date of the previous withdrawal under this category.
Important: This category is available for your 2nd and subsequent properties as well. If you bought your first property 5 years ago and now own an investment property with a RM 400,000 outstanding loan, you can withdraw from Account 2 to reduce that loan balance.
Eligibility Requirements
| Requirement | Details |
|---|---|
| Citizenship | Malaysian citizen or Permanent Resident |
| EPF membership | Must be an active EPF member |
| Age | Below 55 years old |
| Account 2 balance | Sufficient funds (minimum RM 500 for loan reduction) |
| Property type | Residential property in Malaysia |
| Ownership | Property must be in your name (or joint names) |
| Property status | Must have a valid SPA (for purchase) or loan agreement |
What does NOT qualify:
- Commercial property (shophouses, offices)
- Land without a house (except for construction withdrawal)
- Property located outside Malaysia
- Properties held through a company (Sdn Bhd)
Step-by-Step Process
For Property Purchase (Category 1)
Step 1: Sign the Sale & Purchase Agreement (SPA) The SPA is the trigger document. Without a signed SPA, you cannot apply for EPF withdrawal.
Step 2: Obtain supporting documents
- Certified copy of SPA
- Copy of IC (MyKad)
- Loan offer letter from the bank
- Latest EPF statement (printable from i-Akaun)
- Copy of property title or master title (if available)
- Developer's payment schedule (for under-construction properties)
Step 3: Submit KWSP 9C(AHL) form This is the official application form for property withdrawal. Submit at any EPF counter or through the i-Akaun online portal (for eligible cases).
Step 4: Processing EPF processes the application within 2-3 weeks from receipt of complete documentation. Incomplete applications are returned — the most common cause of delay.
Step 5: Payment disbursement EPF pays directly to the relevant party:
- For developer purchase: payment to the developer's account
- For sub-sale: payment to the seller's solicitor or directly to the seller
- For loan reduction: payment to the financing bank
EPF does not transfer funds to the member's personal account. This prevents misuse of the withdrawal for non-property purposes.
For Loan Reduction (Category 2)
The process is similar but requires:
- KWSP 9C(AHL) form
- Copy of current loan statement showing outstanding balance
- Copy of existing SPA
- Copy of IC
Processing time is the same: 2-3 weeks.
EPF Withdrawal for Under-Construction Properties
For properties purchased before completion (from a developer), EPF follows a progressive release schedule that mirrors the construction milestones:
| Construction Stage | Typical % Released |
|---|---|
| SPA signed | 10% of withdrawal amount |
| Foundation complete | 15% |
| Framework complete | 15% |
| Walls complete | 10% |
| Roofing complete | 10% |
| Wiring & plumbing | 10% |
| Internal fixtures | 10% |
| Road & drainage | 10% |
| Vacant possession | 10% |
The withdrawal amount is disbursed progressively as the developer certifies each stage of completion. This protects the buyer (and EPF) against developer abandonment — if the project stalls, the remaining funds stay in your EPF account.
For completed properties (sub-sale or ready units), the full withdrawal amount is disbursed in a single payment. Progressive release only applies to under-construction purchases.
Should You Withdraw? The Financial Analysis
This is the decision that most guides skip. The answer depends on comparing two numbers: what your money earns inside EPF versus what it saves you outside.
What EPF Earns You
EPF has delivered the following dividends on conventional savings:
| Year | Dividend Rate |
|---|---|
| 2021 | 6.10% |
| 2022 | 5.35% |
| 2023 | 5.50% |
| 2024 | 5.50% |
| 2025 | 5.50% (est.) |
The 5-year average is approximately 5.59%. This is a risk-free, tax-exempt return — you do not pay income tax on EPF dividends.
For Shariah-compliant EPF savings, dividends have historically been slightly lower: 5.0-5.4%.
What Property Withdrawal Saves You
When you withdraw EPF for your down payment, you are effectively avoiding the need to finance that amount. The saving is the difference between your financing rate and the EPF dividend rate.
If financing rate > EPF dividend rate: Withdrawing makes financial sense. You save more on interest than you lose in dividends.
If financing rate < EPF dividend rate: Keeping the money in EPF earns more than the interest you would save.
Current comparison:
| Scenario | Rate | Better Option |
|---|---|---|
| Conventional loan at 4.40% vs EPF at 5.50% | 4.40% < 5.50% | Keep in EPF |
| Islamic financing at 4.00% vs EPF at 5.50% | 4.00% < 5.50% | Keep in EPF |
| Conventional loan at 4.40% vs EPF Shariah at 5.00% | 4.40% < 5.00% | Keep in EPF |
At current rates, the math says keep the money in EPF. Your EPF earns 5.0-5.5% tax-free, while your property financing costs 4.0-4.5%. Withdrawing EPF to reduce a loan charging 4.0% means giving up 5.5% — a net loss of 1.0-1.5% per year on the withdrawn amount.
On a RM 50,000 withdrawal, that is RM 500-750/year you are forgoing. Over 20 years, the compounding difference grows to approximately RM 15,000-25,000 in lost retirement savings.
When Withdrawal Makes Sense Despite the Math
The pure rate comparison favours keeping money in EPF at current rates. But there are scenarios where withdrawal is still rational:
1. You cannot afford the down payment otherwise. If the choice is between withdrawing EPF and not buying the property at all, the comparison is moot. A property earning 5.5% gross yield (and appreciating at 3-5% per year) will outperform EPF dividends on a total return basis — even if the monthly cashflow is negative. EPF withdrawal enables the purchase; the alternative is not "keep earning 5.5% in EPF" — it is "do not invest in property at all."
2. You are paying a higher financing rate. If your financing rate is above 5.5% (possible for borrowers with weaker credit profiles or older properties), withdrawing EPF to reduce the loan principal genuinely saves money. This is rare at current OPR levels but worth checking.
3. You want to reduce monthly cashflow drag. Withdrawing RM 50,000 to reduce your loan from RM 450,000 to RM 400,000 lowers your monthly instalment by approximately RM 200-220/month. If a property is borderline cashflow-negative at -RM 300/month, that reduction brings it to -RM 80-100/month — a much more manageable position. The optimization here is not about rates — it is about making the holding period sustainable.
The strategic case for EPF withdrawal is strongest for first-time buyers who need the funds to enter the market at all. For investors who can comfortably afford the down payment from other savings, EPF withdrawal at current rates (financing at 4.0-4.5% vs EPF at 5.0-5.5%) results in a net loss. Keep the money compounding.
EPF Withdrawal for Investment Properties
A common question: "Can I use EPF to buy investment properties?"
The answer depends on the withdrawal category:
Category 1 (Purchase/Construction): This is primarily for the member's own residence. For your first home, the withdrawal is straightforward. For second and subsequent properties, EPF restricts Category 1 withdrawals — the purchase category is intended for owner-occupied housing, not investment portfolio building.
Category 2 (Loan Reduction): This category is available for any residential property in your name — including second, third, and subsequent properties. The property does not need to be owner-occupied. You can use it for an investment property that you rent out.
The conditions for loan reduction withdrawal are:
- The property must be residential (not commercial)
- The property must be in Malaysia
- The property must be in your name (or joint names with your spouse)
- You must have sufficient Account 2 balance
- 1-year cooling period between withdrawals for the same property
This means an investor with existing rental properties can systematically use EPF Account 2 withdrawals to reduce loan balances across their portfolio every year. It is a legitimate and widely used strategy — but for funding the initial purchase of non-first homes, EPF is not the tool.
Impact on Retirement
The counter-argument to EPF withdrawal for property is retirement adequacy. EPF's own data shows that most Malaysians have insufficient retirement savings:
- Basic savings threshold at age 55: RM 240,000 (EPF's recommended minimum)
- Percentage of members meeting threshold at 55: approximately 36%
Every ringgit withdrawn from Account 2 reduces your retirement corpus. The compounding effect means RM 50,000 withdrawn at age 30 is not just RM 50,000 lost — at 5.5% compounding, it is approximately RM 204,000 less in your account at age 55.
The property investment must be evaluated against this opportunity cost. A property that generates positive cashflow and appreciates in value can more than compensate for the EPF withdrawal. A property that bleeds money monthly and stagnates in value leaves you with both a diminished EPF balance and a poor asset.
For a clear-eyed assessment of what property ownership actually costs — the full 12-line cost stack — see our complete ownership cost breakdown. If you are new to property investment and weighing your first purchase, our beginner's guide to property investment in Malaysia covers the fundamentals.
Practical Tips
1. Apply early. Do not wait until the last minute before your SPA payment deadline. Start the EPF application process within the first week of signing the SPA. The 2-3 week processing time can extend if documents are incomplete.
2. Check your Account 2 balance first. Log in to i-Akaun (my.epf.gov.my) and verify your Account 2 balance before committing to a property purchase that depends on EPF funds.
3. Keep all original documents. EPF requires certified true copies of the SPA, IC, and loan offer letter. Keep the originals safe — you may need them for the bank's disbursement process simultaneously.
4. Coordinate with your solicitor. Your property solicitor should be aware that part of the purchase will be funded via EPF withdrawal. This affects the payment schedule and the solicitor may need to provide a confirmation letter to EPF.
5. For loan reduction, time it strategically. The 1-year cooling period means you can withdraw annually, but plan withdrawals to coincide with periods when your Account 2 balance has accumulated meaningfully. Withdrawing RM 500 every year is not worth the administrative effort. Wait until the balance justifies the transaction.
EPF withdrawal for property is a powerful tool — but it is a tool, not a strategy. The strategy is buying the right property at the right price with the right cost structure. EPF withdrawal simply determines how you fund the entry. At current rates, the mathematical case for withdrawal is weak: EPF earns more than your financing costs. The practical case is stronger: for buyers who cannot otherwise enter the market, EPF provides the capital that makes the investment possible. Know your numbers, run the comparison, and decide based on your specific Account 2 balance, financing rate, and investment cashflow — not on general advice from property seminars. Model the numbers on our cashflow calculator with and without the EPF withdrawal to see the actual monthly difference.
Sources & Further Reading
- EPF Act 1991 (Act 452) — governing legislation for EPF withdrawals
- EPF Withdrawal for Housing (Account 2) — official withdrawal guidelines and eligibility
- EPF i-Akaun Portal — online account management and withdrawal application
- Budget 2026: EPF Flexible Account — latest EPF account restructuring