How Pension account holders can apply for mortgage using 25% of RSA balance
A policy describing how RSA account holders can use some of their RSA balances as equity for residential mortgages was published by the National Pension Commission (PenCom).
The rules comply with Section 89 (2) of the Pension Reform Act (PRA 2014), which permits owners of RSAs to use a portion of their retirement funds as equity contributions to obtain a home mortgage.
Limit for equity contribution: According to PenCom, RSA holders may contribute up to 25% of their total RSA balance as of the application date as equity toward a residential mortgage. This will apply regardless of the mortgage lender’s necessary equity contribution percentage.
| 1 | However, in situations where the value of 25% of the RSA balance is more than the required equity contribution, it added that the RSA holder can only access an amount equivalent to the equity contribution required by the Mortgage Lender. |
| 2 | Also, In the case whereby the value of 25% of the RSA is lower than the equity contribution required by the Mortgage Lender, the RSA holder would need to deposit the difference with the Mortgage Lender before 25% of the RSA balance can be applied as equity contribution. |
Eligibility Criteria for RSA Holders: The candidate must be actively engaged, either as a salaried employee or as a sole proprietor. Furthermore, the application for a residential mortgage equity contribution must be made in person, not by proxy.
| 1 | Applicants must have updated their records through the RSA data recapture exercise if registered before 1 July 2019. |
| 2 | For equity contribution for a residential mortgage, an RSA holder can only access his/her RSA once. |
| 3 | Applicants must have an Offer Letter for the property duly signed by the property owner and verified by the Mortgage Lender. |
| 4 | The applicant must have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months before the application for the RSA holder to access his/her RSA balance for equity contribution for a residential mortgage. Notably, applicants may utilize the contingent portion of his/her Voluntary Contribution (VC) for equity contribution, in line with the Voluntary Contribution Guidelines under the CPS. |
| 5 | A Micro Pension Contributor is also eligible to access his/her RSA balance towards the payment of equity contribution for a residential mortgage provided he/she has made contributions for a minimum of 60 months before his/her application. |
| 6 | 4.1.10 RSA Holders who had accessed their RSA balances due to loss of employment before the issuance of these Guidelines are eligible to access their RSAs for equity contribution, provided their RSAs had received employer and employee contributions for a minimum of 60 months from the date of the first contribution. |
| 7 | 4.1.11 RSA holders that have utilized 25% of their RSA balance for equity contribution for a residential mortgage are also eligible for payment of 25% of their RSA for loss of job in line with the provision of Section 7(2) of PRA 2014. |
| 8 | RSA Holders that have less than 3 years to retirement will not eligible to use a portion of their RSA balances as equity contributions for a residential mortgage. |
| 9 | Existing Retirees on CPS and exempted persons under the PRA 2014 are not eligible to use their RSA balances for payment of equity contributions for Residential mortgages. |
| 10 | 4.1.14 Married couples, who are RSA holders, are eligible to make a joint application, subject to individually satisfying the eligibility requirements. |
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How RSA holders can apply
Step 1: Applicant obtain a property offer letter from the property owner or approved agent and approaches a Mortgage Lender
Step 2: Applicant fills out an application for a mortgage, which is provided by the Mortgage Lender, and attaches the property offer letter. The application form will contain minimum information such as the Full name of the RSA holder, PIN of the RSA holder, Name of the Mortgage Lender, Value of the property, etc.
Step 3: After confirmation of the property offered by the mortgage lender, the applicant approaches his/her PFA and requests his/her RSA Statement to access the 25% of his/her RSA balance for payment of equity contribution – In a joint application, each party will need to apply to their respective PFA’s with copies of the verified property offer letter.
Step 4: The PFA issues a duly endorsed RSA statement to the applicant, which the applicant forwards to his/her Mortgage Lender and updates the record on Applications for Equity Contribution for Residential Mortgage upon issuing the RSA Statement to the RSA holder.
Step 5: The Mortgage Lender verifies if 25% of the applicant’s RSA balance will be sufficient as an equity contribution. Where 25% of the RSA balance is sufficient as equity contribution, the Mortgage Lender issues a mortgage offer letter to the applicant but where 25% of the RSA balance is not sufficient, the Mortgage Lender requests for the payment of supplementary equity contribution from the applicant(s).
Step 6: The Mortgage Lender issues a mortgage offer to the applicant after confirming payment of supplementary equity contribution.
Step 7: The Mortgage Lender forwards a copy of the mortgage offer letter and the under-listed document’s additional information to the applicant(s) PFA within two working days of the issuance of the mortgage offer letter to the applicant.
Step 8: The applicant may after two working days of receiving his/her mortgage offer letter, approach his/her PFA to request for payment of his/her Equity Contribution for Residential Mortgage.
Step 9: The applicant shall obtain and fill out an Application Form, with indemnity to the PFA, for the payment of his/her Equity Contribution for the Residential Mortgage. In a joint application, each party shall apply to their respective PFA with a copy of the mortgage offer letter.
Step 10: The PFA reviews the application form and the supporting documents received from the Mortgage Lender for completeness using a checklist of requirements within two working days.
Step 11: Upon successful completion of the documentation review, the PFA updates the applicant’s Mandate File within two working days. If any exceptions or discrepancies are identified during the documentation review, the PFA shall communicate the exceptions to the Mortgage Lender within two working days of identifying such exceptions.
Step 12: The PFA computes and validates that the requested amount is not more than 25% of his/her RSA Balance.
Step 13: The PFA processes the application and forward same to the Commission within two working days of successful documentation review and awaits the approval of equity contribution and notification.
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