8 Things You Should Know When Using CPF for Property

Below is an article published with permission from the CPF Board. Singapore home owners should pay close attention to the policy on accrued interest for CPF monies.

Many members use CPF savings when buying a property. Before you decide on buying your dream home, we highly recommend reading “Things to look out for when buying a property using CPF” and watching “Buying a House” videos.  Here’re 8 essentials you should be aware of. Please note that the information may be different if you are using CPF for multiple properties.

Q1. What CPF savings can I use to buy a property?

Only Ordinary Account (OA) savings can be used for property. You can use it to:

(i)  Pay lumpsum/downpayment to HDB for the purchase of an HDB flat, or to a property developer or a seller for the purchase of a private property.

(ii)  Repay the housing loan taken for the purchase of HDB flat or private property.

(iii)  Pay legal fees, stamp duty, transfer fees and other related costs incurred in relation to the housing purchase.

(iv)  Repay a housing loan taken for the purchase of land and/or for construction of a house on that land (for private property).

If you use your CPF savings to service a housing loan on a HDB flat, you are required to be covered under the Home Protection Scheme. This is a mortgage-reducing scheme to protect you and your family from losing your home in the event of death or permanent incapacity before the housing loan is paid up.  The annual premiums for this can be paid using your OA savings.

See more details on how you can use CPF for a HDB flat and private property.

Q2.  Do I need to refund the CPF used for housing when I sell my property?

CPF savings are important not just for our housing needs, but also our retirement. To ensure that you have enough retirement savings when you sell your property, the amount that you would have accumulated in your CPF if you had not withdrawn it for housing will have to be refunded. So yes, when the property is sold, you and any property co-owners would use the sales proceeds to refund the principal amount (P) used and the accrued interest (I) into your respective Ordinary Accounts.

The accrued interest is what you would have earned had you not used your CPF for housing.  The accrued interest is computed based on the OA savings interest rates applicable during the period that the savings were withdrawn from the OA. You can view the amount that is refundable to your CPF account in your property statement at www.cpf.gov.sg by using your SingPass.

However, if the sale proceeds after paying off any outstanding mortgage are lower than the sum of principal amount and accrued interest, you will not be required to top up the shortfall as long as the property is sold at or above current market value.

The amount refunded to CPF from a property sale can be used for subsequent property purchases if you choose to buy another one.  If you are above 55, the CPF refund into the Ordinary Account will be used to top up your Retirement Account up to your Minimum Sum and your Medisave Account up to the latest Medisave Minimum Sum. Any excess CPF refund will be paid to you within 5 working days from the crediting of the refund to your CPF account.

Q3. Do I need to return my CPF with accrued interest if I sell my property at a loss?
If you sell your property and the sales proceeds is insufficient to make the full CPF refund required (OA savings used plus accrued interest) after paying off the housing loan, we will allocate the remaining sales proceeds between your co-owner’s and your CPF account. See illustration below.  

You and your co-owner do not need to top up the shortfall in cash as long as the property is sold at or above its current market value.

Q4. Can I continue to use CPF to service my housing loan after 55?

When you turn 55, savings in your Special and Ordinary Accounts will be set aside to make up the CPF Minimum Sum (MS) in a newly-created Retirement Account (RA). The balance in your OA can be used for housing loan repayments. If you continue working after 55, your new CPF OA contributions can also be used for housing loan repayments.

The Minimum Sum provides monthly retirement payouts from your draw down age, which is 65 for those born in or after 1954. However, if you wish, you can use any amount above half of your Minimum Sum in your Retirement Account for housing needs.  Please note that the relevant housing limits would still apply.

* Refers to the cash set aside in your RA, excluding amounts such as interest earned, any government grants received, top-ups made under Minimum Sum Topping-up Scheme and amounts withdrawn

Q5. Are there limits on the use of CPF for property?

Yes, there are two types of limits: the valuation limit (VL) and the housing withdrawal limit (WL). These limits are however not applicable for those who buy new HDB flats using a HDB concessionary loan.

These limits are in place to help ensure you will have CPF savings set aside for retirement even as you use them for housing.

Q6. What is the valuation limit, and what happens if it is reached?

The valuation limit (VL) is the lower of the purchase price or the value of the property at the time of purchase. Eg if the purchase price is $400,000 and the property valuation is $420,000, the VL is $400,000.

If the housing loan is still outstanding when the total CPF used by all the property owners has reached the VL, and you are:

a)    Below 55: you may continue to use your CPF Ordinary Account savings to repay the housing loan if you can set aside half of the current CPF Minimum Sum. Savings in the Special Account (including the amount used for investments) and Ordinary Account can be used to meet half of the current Minimum Sum.

b)    55 years and above: you may use your excess CPF Ordinary Account savings to repay the housing loan after setting aside half of your CPF Minimum Sum. This can be made up of savings in your Retirement Account, Special Account (including the amount used for investments) and Ordinary Account.

Otherwise, you have to use cash to service the loan instalment.  The VL does not apply if you are buying a new HDB flat using a HDB concessionary loan.

Q7. What is the housing withdrawal limit, and what happens if it is reached?

The withdrawal limit is the maximum amount of CPF savings that can be used for a particular property. If the withdrawal limit is reached, you would have to use cash to service the housing loan instalment. The withdrawal limit is set at 120% of the property’s valuation limit.

This limit applies to private properties and HDB flats that are purchased using bank loans on or after 1 January 2008, and to properties that had their housing bank loans refinanced on or after 1 January 2008. (Please see Q8 for property with less than 60 years lease).

For example: You and your spouse buy a property today using a bank loan. The purchase price is $500,000 and the market valuation is $490,000. The valuation limit is the lower of the two, ie $490,000. The housing withdrawal limit would be $588,000 ($490,000 x 120%).

When the total usage of CPF savings for the property reaches $588,000, both you and your spouse would have to use cash to continue paying the housing loan instalments. Do note that the total usage includes the use of the Ordinary Account savings to repay the monthly loan instalments, any lumpsum capital repayments, for the initial downpayment and progressive payments for private properties under construction.

Q8. Can I use my CPF for a property with less than 60 years lease?

This depends on the remaining lease of the property and your age at the time of purchase. If the remaining lease is less than 30 years, you will not be able to use CPF for the purchase.

For a remaining lease of more than 30 but less than 60 years, your age plus the remaining lease must be at least 80 years. This helps to ensure that you have a home even during your old age. The amount of CPF you can use will be lower as compared to buying a property with more than 60 years lease. It is calculated based on the following formula:

For example:
You are 40 years old and are the youngest owner of a property with a remaining lease of 50 years. When you turn 55 years old 15 years later, the property’s remaining lease will be 35 (i.e. 50 – 15) years.

Assuming the valuation limit is $490,000, the maximum amount of CPF that can be used for the property purchase is $343,000 (i.e. 35/50 x $490,000).

You can use the Property with Less Than 60 Years Lease Calculator to calculate the amount of CPF you can use.

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