3 Big Things to Know Before Using Your CPF to Purchase Property

Yes, yes, we all know that uttering that acronym “CPF” is as much of a buzzkill as a eating at the latest “hot” restaurant and realising it actually sucks. 

But regardless, the CPF is crucial for building our wealth and more important to our overall wellbeing than the newest “in” thing (obvi).

One of the big things that the Central Provident Fund (CPF) does is help us purchase our property in Singapore. More specifically it’s the money in your CPF Ordinary Account (OA) that helps you become a homeowner.

It can be a pretty tedious process but, thankfully, we’re here to help you break it down. So, here are three key things you need to know before you go about splashing your CPF cash on a property.

 

 

1. What can you actually use your CPF funds for with property?

 

The process of buying a property will (literally) want to make you pull your hair out so, to help prevent future hair loss, it’s probably better you’re mentally prepared.

Understanding the step-by-step process of what you can use your CPF OA funds for is crucial. Here are a few things you can use your CPF OA for in the homebuying process.

 

Downpayments

The first thing we can use it for is a downpayment, which can come in various forms:

• HDB flat buyers taking an HDB loan – 10% downpayment, which can be completely paid with your CPF OA.
• HDB flat buyers taking out a bank loan – 25% downpayment, with up to 20% from your CPF OA and at least 5% in cash.
• Private under-construction development – 25% downpayment, of which at least 5% must be paid in cash.
• HDB resale flat – Deposit of up to $5,000 which must be paid in cash.
• Private resale property – Deposit of at least 5%, including an option fee of at least 1% which must be paid in cash.

One thing to note from the above is that you can not pay deposits and option fees for HDB resale properties and private resale properties with your CPF OA.

 

Leftover portion of the purchase price (not covered by housing loan)

Ok so now that you’ve sorted out your downpayment, what else can you use your CPF OA for in the homebuying process? 

Well, you can use a combination of cash and/or CPF funds to pay for the portion of the purchase price (if any) that is not covered by your housing loan.

This money will be paid in a lump sum to the seller upon completion or, in the case of a BTO or uncompleted property, whenever it becomes due.

 

Home loan repayments

Your CPF OA money can also be used to make your home loan repayments/installments. If you have drained your account in the initial stages of your property purchase but are still receiving CPF contributions every month from your employer, these contributions can be used to make your monthly home loan repayments. 

To get those housing installment repayments started, you just have to apply via the HDB website using your SingPass. 

This ability to use your CPF OA for housing loan repayments/installments applies to both HDB and bank loans.

 

Legal fees and stamp duty

Ah, the joys of admin and legal fees in the housing purchase process. Well, the good news is that you can use your CPF OA money to pay stamp duty, legal fees and other administrative charges. 

Your lawyer or HDB will have you pay them directly for these charges. 

Since this is on a reimbursement basis, it means that you will need to have the cash upfront to pay for the services before the CPF then reimburses you.

 

Home Protection Scheme fees

HDB flat buyers who don’t have life insurance covering outstanding home loans have to be insured under the Home Protection Scheme (HPS). This helps insure member until they’re 65, or until the housing loans are paid up.

The HPS protects you and your family from losing your flat if you die, get diagnosed with a terminal illness or are totally and permanently disabled. Your annual HPS premiums can be paid using your CPF OA funds.

 

 

2. CPF limits on what you can use

 

How much of your CPF can you use expect to be able to use to buy a house? You can’t go all out with your CPF to purchase property.

In fact, there are limits controlling how much of your CPF funds you can use to purchase a property.

There are 2 main types of limits that can affect you: valuation limit and withdrawal limit.

 

Valuation Limit

 

 

With the valuation limit, you have the purchase price of your property. This is basically the amount you are paying. 

Then you have the actual market value of your property. The Valuation Limit (VL) is the lower of these two figures.

So if you are paying $500,000 for your property but the market value is actually lower at $450,000, the VL will be $450,000. 

Your CPF money can be used to pay for the property up to the VL, including your downpayment and home loan repayments.

 

Withdrawal Limit

 

 

On the other hand, the Withdrawal Limit (WL) is higher than the VL, and lets you borrow above what the VL permits.

As of 2024, the WL is capped at 120% of the VL.

Now that you understand what the VL and WL are, it’s time to figure out which ones apply to you, which you can see in the below table.

Type of property	Type of housing loan	CPF amount you can use
New HDB flat	HDB loan	No limit
Resale HDB flat	HDB loan	Valuation Limit, or no limit if you can park aside the Basic Retirement Sum ($102,900 in 2024)
HDB flat or private property	Bank loan	Valuation Limit, or 20% from OA if you can park aside the Basic Retirement Sum ($102,900 in 2024)

Relaxing of CPF rules for older flats

Changes in CPF rules for housing purchases will allow home buyers to buy ageing flats with larger loans via your CPF. 

That’s only applicable as long as the property’s remaining lease covers the youngest buyer until the age of 95.

Minimally, HDB flats must still have at least 20 years left on their leases before they can be paid for with CPF funds. Here’s a table detailing the most recent changes made to the CPF rules, back in May 2019.

Changes	Before 10 May 2019	After 10 May 2019
Minimum lease left to obtain maximum CPF usage and HDB housing loan	Flats with 60 years or more left can be paid with CPF up to VL	Flats with at least 20 years left on the lease and which can cover youngest buyer until at least 95 can be paid with CPF up to VL.
	Flats with 30 years to less than 60 years can be paid with CPF if the remaining lease of the property can cover the youngest buyer to the age of 80, capped at a percentage of VL or property purchase price, whichever is lower.
Minimum lease	Owner age + remaining lease is at least 80 years	Owner age + remaining lease is at least 95 years
HDB housing loan	Restrictions on the amount of HDB housing loan for purchases of flats with less than 60 years remaining.	Up to the full 85% loan-to-value limit for housing loan as long as flats have at least 20 years left on the lease and can cover youngest buyer until age 95.

 

 

3. Hitting the big 5-5 soon? You can still use some of those CPF savings

 

When you hit 55 years of age, your CPF OA isn’t going to look the same anymore. 

Besides being older, if you don’t have that much in your CPF savings, you could find yourself with only $5,000 in your OA.

That’s because the rest of your money together with the funds in your CPF SA get channelled into your newly-created Retirement Account (RA).

With so little money left in your CPF OA, does that mean you can no longer buy property? The simple answer is “no”.

If you haven’t paid off your home loan by age 55, before you turn 55 you can apply to reserve savings in your CPF OA that are specifically reserved for home loan repayments. Again, you can do this relatively easily by submitting your request online via Singpass.

This will prevent that designated money from being transferred into your RA when you turn 55. It will, however, affect your monthly retirement payouts. So, you will have to do some basic figures on how exactly it will impact you down the line.

After 55, you can still use some of your CPF funds to make home loan repayments, provided you pledge your property and still have at least the Basic Retirement Sum (BRS), which is currently S$102,900, in your account after any withdrawals.

By pledging your property, you are committing to refund all the amounts used with interest into your CPF account if/when you sell your property.

That being said, there are other avenues to finance your home loan, such as a bank loan. In fact, we’ve compared the pros and cons of a HDB loan vs a bank loan, and how you could be saving money with a refinanced bank loan. 

Besides that, we’ve also covered how much of a downpayment you’ll really need for your new home. Remember, just do the maths beforehand and make the most practical choice that works for you and your family!