Planning to Buy a Home? Use Provident Fund Wisely

Planning to buy a home but the insufficient funds is restricting your way? Then, calculate how much PF aka Provident Fund is there in the account since you started a job. This account balance supports you through the thick and thin times as the PF amount help you have an easy access to money while facing financial crises. So, this blog post will help you understand how to use PF alias the Provident Fund amount for purchasing a home.

Provident Fund

Img: Pixabay

What is Provident Fund?

This term can also be called as the pension fund. The objective of this fund is to help employees or the working professionals with a Lumpsum amount at the time of their exit from the organization. This funding is available in two options that are monthly payments and a Lumpsum collection of money. The amount deducted from the employees part and the employer contribution vary from organization to organization. As, each company/organization have pre-determined Provident Fund policy. This fund is unanimously called as PF but here in India, this policy is popularly known as the Employees’ Provident Fund Organization, India’s retirement plan.

 Provident Fund for Purchase of Plot:

An employee can apply for the disbursal of PF amount only after completing five years of service in the organization in order to purchase a plot/land. Also, this amount can be availed for construction of a home on the previously owned plot/land either by you or spouse. The sanction of PF amount depends largely on 24 month’s basic salary and DA [Dearness Allowance]. The loan amount sanction widely depends upon the minimum low amount available in the PF account or the cost of land/plot to be purchased.

Provident Fund for Purchase of a Residential Property:

The criteria of PF amount, salary tenure and DA increase from 24 months to 36 months in case you are planning to avail home loan for an already constructed home/residential property. Here also, the loan amount sanction is valued according to the minimum low amount available in the PF account or the cost of the house/residential property to be purchased.

Development related to Property Transaction:

The construction on the purchased plot/land should commence within six months and is necessary to be completed within 12 months tenure i.e. within a year from the date of PF amount withdrawal. In another case, the purchase of a ready to move in apartment/residential property should be completed within six months from the date of PF amount withdrawal.

Repayment of PF Amount:

The repayment of the withdrawn PF amount has to be made in one go or else in EMIs. The repayment mode depends upon circumstances and amount.

Easy Repayment of Housing Loan:

Pay off the outstanding home loan amount can be done by withdrawing the PF amount. An employee can only withdraw this amount if the home loan he/she apply to payback is sanctioned on either his/her name or on the spouse name. Here also, the advance amount cannot exceed the limit of 3 years i.e. 36 months of basic salary and DA. Remember that this withdrawal of amount will be sanctioned only if the home loan is availed from particular entities such as the Governments and State Government, registered co-operative society, State Housing Board, Nationalized Banks, Public Financial Institutions, Municipal Corporation, or any other Development Authority, for making the purchase of a property.

PF Amount Withdrawal for Renovation/Extension of Residential Property:

A person can withdraw his/her PF amount to carry out the renovation/extension of a residential property owned five years ago. Also, the property on which the renovation work has to be carried out shall be on his/her name or on the spouse’s name. This amount can be withdrawn even if he/she availed the PF amount for purchase of a plot or residential property. It is also not important to avail this amount for the renovation of the property for which you have already availed the PF withdrawal.

Also, the person cannot withdraw his/her PF amount before the completion of ten years of his/her previous withdrawal. Here, the restriction limits up to one year i.e. 12 months’ basic salary and DA [Dearness Allowance], subject to lower of the balance relatable to the employee’s share with interest in your account or the cost of such improvement.

The person is eligible to withdraw the PF amount incorporated with your minimum salary and DA related to the minimum amount estimated for use in the renovation of the property owned by you or your spouse.

On a whole, you must use the PF amount wisely because of the clauses like tenure and minimum withdrawal limit.