You don’t have to wait till you’re old and wizened to use the money in your CPF account. The first time you’ll find yourself using your CPF monies is usually to buy a home.
The money in your CPF OA can be put towards the purchase of any kind of home in Singapore, HDB or private, resale or under construction, so long as it’s not a cardboard box or tent.
But to use your CPF money to buy a home, you can’t just stand outside HDB Hub at Toa Payoh and wait for a house to appear. You need to know when and how you can tap into your CPF money.
Here’s what you need to know.
Using your CPF funds for a home – What can you use it for?
When you buy a property, you don’t just hand over a million dollars to the cashier and then wait for the change.
Your payment will actually happen step-by-step in a few phases, and you will need to know which of these phases you can use your CPF OA money to pay for.
CPF OA funds can be used to pay for 5 key things:
Your CPF savings can be put towards your downpayment. Do note, however, that you might still required to put up some cash.
- HDB flat buyers taking an HDB loan: 15% downpayment, which can be completely paid with CPF savings. You may also qualify for the Staggered Downpayment Scheme if one applicant is under 30 years old at the time of application.
- HDB flat buyers taking out a bank loan: 25% downpayment, up to 20% from CPF, and at least 5% in cash.
- Private under-construction development: 20% deposit, 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.
2. Leftover portion of the purchase price that’s not covered by housing loan
After you have paid your downpayment, 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.
3. Home loan repayments
Your CPF OA money can also be used to make your home loan repayments.
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. This applies to both HDB and bank loans.
4. Legal fees and stamp duty
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 for these charges. Do note that this is on a reimbursement basis, which means that you will need to have the cash upfront before CPF reimburses you.
5. Home Protection Scheme fees
HDB flat buyers who don’t have life insurance covering outstanding home loans must be insured under the Home Protection Scheme (HPS), which 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.
Limits to how much CPF you can use
How much CPF can you use to buy a house? Not everything. There are limits controlling how much CPF funds you can use to purchase a property.
There are two main types of limits that can affect you: valuation limit and withdrawal limit.
1. Valuation Limit
You have the purchase price of your property, which is basically the amount you are paying. Then you have the 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 only $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.
2. Withdrawal Limit
The Withdrawal Limit (WL) is higher than the VL, and lets you borrow above what the VL permits.
Right now, the WL is 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.
|Type of property||Type of housing loan||CPF 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 Basic Retirement Sum ($96,000 in 2022)|
|HDB flat or private property||Bank loan||Valuation limit, or 20% from OA if you can park aside Basic Retirement Sum ($96,000 in 2022)|
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 CPF, 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 monies. Here’s a table detailing the most recent changes made to the CPF rules 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.|
You might still be able to use some of your CPF savings to pay for property when you reach 55
When you hit the age of 55, your CPF OA isn’t going to look the same anymore. Simply put, if you don’t have that much CPF savings, you could find yourself with only $5,000 in your OA, as the rest of your money together with the funds in your SA get channelled into your newly-created Retirement Account (RA).
With so little money in your CPF OA, does that mean you can no longer buy property? Not exactly.
If you won’t have paid off your home loan by age 55, before you turn 55 you can apply to reserve savings in your OA for home loan repayment. This will prevent the money from being transferred into your RA when you turn 55. It will however affect your monthly retirement payouts, so proceed with caution.
After 55, you can still use some of your CPF funds to make home loan repayments, provided you pledge your property and will still have at least the Basic Retirement Sum 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. Aside to that, we’ve also covered how much downpayment you need for your new home. Remember, the choice is yours!
Do you intend to use your CPF savings to purchase property or have you already done so? Share your experiences and this article with your friends and family!