Friday, April 13, 2012

Reducing the principal

This morning, we went to EPF office to apply for the withdrawal for housing loan reduction from Account 2. The house loan has been 5 years plus and we still owe around RM270k plus. All those years we keep paying the interests and the loan amount does not reduced much. After much weighing, we decided to reduce the principal via EPF withdrawal. I am not so sure whether it is a wise move but BLR has been higher so with the loan amount reduced we do not have to pay too much interests.



We did our first withdrawal back in 2007 when we were to pay our down payment for the house.


Anyone doing the same thing as I do??? Any differing opinion?

6 comments:

  1. I think many do that to pay for their houses - what to do when you do not have any ready cash. It's definitely better than borrowing from the bank...and having to pay the high interest.

    EPF pays around 6% bonus per year...Calculate how much you have to pay back a year if you get a loan from the bank - more than 6% or not...and then you decide which one is better.

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  2. I heard house is quite expensive over there at your place, right?

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  3. I am doing that too! I will pay in lump sum when I have more money. And my bank allows me to pay as "special principal payment" to reduce the principal.

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  4. I have no idea about houses and loans. My hubb is the one who settle it. EPF is giving 6% interest which is quite high. But I'm not sure how about BLR.

    Sorry, not very helpful here.

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  5. Besides EPF, we can actually save up some money,let say your monthly installment is RM500, one hand you faithfully pay the installments, the other hand,you save 6 x RM500,then you tell the bank if for principal reduction and not for advance payment, do it that way,,,, it will be quicker,,,,,,,,, hey I am so happy, me and my lovely wife are about to be debt free very soon,,, hahahah, we also saved very very hard lah... it is good that way,, I am still driving me an old Wira,, but I can save more each month,,,

    take care now and god bless

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  6. I will suggest to withdraw from EPF to reduce the loan interest. The interest is much higher than the interest given by EPF.

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