.png)
Are you using CPF for property purchase?
For most of us, using CPF for properties is a no-brainer. After all the monies is sitting in our CPF Ordinary Account (OA). And using it on properties is a legit way, why not?
In this article, we will go through the CPF policies and regulations for property usage. This will help us to make an informed decision whether we should use CPF for property purchase.
CPF Contribution and Allocation Rates -
Ordinary Account (OA), Special Account (SA), Medisave Account (MA)
Ordinary Account (OA) is the primary source of funds for property transactions. We can use OA for the purchase of HDB and private properties.
Special Account (SA) is used for retirement and investment
Medisave Account (MA) is used mainly for medical expenses and approved medical insurance.
The bulk of our CPF contribution goes to OA when we are younger. The contribution will shift more towards SA and MA as we grow older, to prepare us for retirement needs.
How much is the CPF Interest Rate?
CPF monies are being paid interest of up to 5% for those aged below 55, and up to 6% for aged 55 years and above (ref to diagram below).
How much CPF can I use for purchasing a property?
(i) Purchase of HDB Flats
There are limits on the amount of CPF you can use for HDB purchases. It depends on the following:
Buying a new or resale HDB flat;
The remaining lease of the flat can cover the youngest buyer using CPF for the flat to be at least 95 years old. If it cannot be covered, CPF usage will be pro-rated;
Your choice of financing, whether it's the HDB concessionary loan or a bank loan, will also influence the amount of CPF you can use for the purchase of the flat.
(ii) Purchase of Private Properties
There are limits on the amount of CPF you can use for purchase of private properties. It depends on the following:
Number of properties (e.g. HDB flat/private property) owned;
The remaining lease of the property can cover the youngest buyer using CPF for the property to be at least 95 years old. If it cannot be covered, CPF usage will be pro-rated;
You can use CPF Housing Usage Calculator to compute how much CPF you can use for your property.
(iii) CPF Withdrawal Limits
There are 2 types of limit to how much CPF you can use for property purchase. They are Valuation Limit (VL) and Housing Withdrawal Limit (HWL).
These limits are not applicable for buyers who buy new HDB flats with HDB concessionary loan.
Valuation Limit
Valuation limit (VL) is the purchase price or market value of the property at time of purchase, whichever is lower.
When the VL is reached, you can continue to use your CPF to service the monthly loan instalment only if you have set aside your Basic Retirement Sum.
Otherwise, you have to use cash to service the monthly loan instalment.
Housing Withdrawal Limit (HWL)
Housing Withdrawal Limit is the maximum amount of CPF that can be used for a particular property. Once HWL is reached, owners would have to use cash to service the monthly loan instalment.
HWL is capped at 120% of the property's valuation limit.
Can I continue using CPF to service my monthly loan instalment after 55?
When you turn age 55, the savings from your Special Account (SA), followed by Ordinary Account (OA), will be transferred to a newly opened Retirement Account (RA).
The amount to be transferred is capped at the Full Retirement Sum (FRS) as a point of reference of how much you might need for your retirement. You can use the balance in your OA to service your monthly loan instalment after you have set aside the Full Retirement Sum.
You can also choose to pledge your property with CPF and use the balance of the Basic Retirement Sum (BRS) to service your instalment.
Do note that the balance lease of the property has to cover the owner till age 95 in order for you to continue using CPF to service instalment after setting aside the Retirement Sum.
If you continue working after 55, your new CPF OA contributions can also be used for the housing loan repayments.
Can I use my CPF for an ageing property?
You can use CPF to buy property as long as the remaining lease of the property covers the youngest buyer to age 95. If not, CPF usage will be pro-rated. Go to CPF Usage Calculator to determine how much CPF you can use.
CPF cannot be used for repayment of property with less than 20 years of remaining lease.
(Related reading: Should You Keep Or Sell Your Ageing HDB Flat?)
Buying Multiple Properties Using CPF
You can use the excess of Basic Retirement Sum (BRS) in your OA to buy multiple properties.
However, if none of your properties can cover the youngest buyer till age 95, you will need to set aside the Full Retirement Sum (i.e. twice the BRS) before you can use excess OA funds to buy other properties.
Do I need to pay back CPF after I sell my property?
CPF savings are important for both housing needs and retirement. Property owners need to return what they have used (with accumulated accrued interest) to their CPF OA.
You can view the amount to be refunded to your CPF account by logging into your CPF website.
Do I need to top up the CPF shortfall if I sell my property at a loss?
The formula for calculating sales proceeds is as follow:
Cash Proceed = Selling Price - Outstanding Mortgage - (CPF Used + Accrued Interest)
*For HDB properties, owners might need to deduct other costs like resale levy and/or upgrading fees.
If there is negative sales proceed (where the selling price is not sufficient to return to CPF after paying off outstanding mortgage), you will not be required to top up the shortfall. However, the property must be sold at or above current market value.
CPF will allocate the remaining sales proceeds after paying off outstanding mortgage loan between the owner and co-owner’s CPF account.
Please note that all deposits collected will have to be surrendered so that it can be returned to your CPF OA.
What about Housing Grants?
Housing grants are grants given to HDB buyers to help them own a flat. There are many kinds of grant - Family Grant, Singles Grant, Proximity Housing Grant etc.
Housing grants are given in the form of CPF. They will be credited into your CPF OA and be used to offset the purchase price. As per the regulations pertaining the usage of CPF for property purchase, this amount together with accrued interest, has to be returned to your CPF OA when you sell the flat.
On 22 August 2024, MND and HDB announced a set of measures to cool the HDB resale market, and to provide more support to lower-to-middle income first-time home buyers.
Currently, eligible first-timer families and singles buying a flat can receive up to $80,000 and $40,000 in EHG, respectively. The grant is tiered by household income, with lower-income households receiving more assistance. There are no restrictions on flat type and location.
New Flats
Eligible first-timer families who buy a new flat will receive up to $120,000 in EHG, on top of the significant market discount in the flat price, while singles will receive up to $60,000 in EHG.
Resale Flats
Eligible first-timer families who buy a resale flat will receive up to $230,000 in housing grants, comprising the revised EHG of up to $120,000, a CPF Housing Grant of up to $80,000 and a PHG of up to $30,000.
For eligible first-timer singles who buy a resale flat, they can receive up to $115,000 in housing grants comprising the revised EHG of up to $60,000, a CPF Housing Grant of up to $40,000 and a PHG of up to $15,000.
For more information, you may refer to HDB website.
I hope this article has given you a better understanding regarding the use of CPF for property. Please feel free to share this article with someone whom might find it useful :)
If you would like to have a chat on any real estate matters, make an appointment with me for a non-obligated discussion!
Related Articles
About The Author
Vivian joined the real estate industry in 2002.
Over the years, she has transacted numerous property deals, including HDB and private properties. She is well-versed in policies and regulations involving selling and purchasing residential properties. She has also handled complicated transactions like contra, divorce, administration/probate cases, and decoupling / part-share purchases.
Aside from her professional achievements, Vivian is a dedicated mother to 2 boys. Her role as a real estate mom has allowed her to strike a balance between her career and family, spending quality time with her children as they were growing up. Both boys are passionate footballers, and she takes great joy in supporting them at their school and club games.
Vivian is an active real estate salesperson and team leader. Call her at 98577714 for your real estate matters or if you are looking to join the industry.