The National Pension Commission (PENCOM) had in September 2022, officially approved the guidelines that allow Retirement Savings Account (RSA) holders access a residential mortgage in line with section 89(2) of the Pension Reform Act of 2014.
This enables RSA holders to realize the dream of owning a home instead of waiting to accumulate the full purchase price. You can secure a property and start building equity sooner such that at the time of retirement, you could potentially have a fully paid-off property, reducing your living expenses.
To access the mortgage loan, enrollees are required to fulfill the eligibility of a minimum of 60 months’ worth of contributions.
In situations where an enrolee’s contribution falls short of covering the equity for the mortgage, the additional voluntary contribution (AVC) can be used to boost savings thereby achieving the target balance.
Eligibility and Procedural Guidelines
To initiate the process of accessing 25% of your RSA funds for the mortgage, the initial step entails consulting your Pension Fund Administrator (PFA) to confirm eligibility. You will be provided with your account statement and the comprehensive checklist to facilitate the process if eligible.
Next, you are to obtain an offer letter of purchase for your preferred residential property after which you proceed to approach a certified mortgage lender with a endorsed copy of your RSA statement to submit your application.
After review and approval of your application by the lender, you are to proceed to formally apply to your PFA to allocate up to 25% of your RSA balance for equity contribution which would subsequently be forwarded to PENCOM.
Upon receipt of approval from PENCOM, your PFA will notify your mortgage lender and finalize the requisite documentation, which is necessary to remit the sanctioned equity contribution. Once this is completed, your Pension Fund Custodian (PFC) will be instructed to transfer the equity contribution to the mortgage lender.
It is crucial to note that a maximum of 25% of your RSA balance must be sufficient to cover the equity contribution for the mortgage. Couples can jointly apply for 25% of their pension balances, provided each satisfies the eligibility criteria.
The Requirement from the Mortgage Lender
The lender is required to furnish the PFA with the following documents:
- A copy of the mortgage application form and a verified property offer letter, detailing the property’s value and address.
- Loan amount and the equity contribution required.
- Bank account details of the applicant with the mortgage lender.
- Insurance provided by the mortgage lender to the PFA regarding the equity contribution’s utilization.
- Proof of payment for the difference if 25% of the RSA balance cannot cover the required equity.
At PAL, our commitment remains steadfast in aiding and guiding you through the intricate mortgage application process and other related inquiries. Remember, we are here for you every step of the way – your lifelong PAL.