The Dark Side of CPF Housing Withdrawal Limit
This is an article that all existing and aspiring home-owners should never miss. And I do mean it. A few years ago, I wrote about a 54-year-old Singaporean lady who was left stranded after she was not allowed to use her CPF monies to finance her home. In her situation, she had to use cold hard cash to pay for her housing loan even though she still had savings in her CPF Ordinary Account (OA). Read on to find out how to avoid this devastating financial pit-fall created by CPF Housing Withdrawal Limit in your twilight years.
Before I proceed further, there are a few things you need to know about CPF Housing Withdrawal Limit. Specifically, they are Withdrawal Limit, Valuation Limit, HDB loan, type of property and lastly, bank loan. I will first discuss the merits and cons of HDB loan.
HDB Loan
Through the years, Singapore government has been packaging HDB loan as a form of “privilege” exclusive only to Singaporeans. To qualify for this “privilege”, you need to meet many eligibility conditions. Hence, this give Singaporeans the impression that getting an HDB loan is the best option when financing property. In my point of view, such thinking may not hold water.
Just think about it. The HDB concessionary housing loan interest rate is pegged at 0.1% above the CPF OA interest rate. The CPF OA interest rate has been 2.5% for the longest time. So effectively, those who opted for HDB loans would be paying 2.6% of interest rate for their housing loans. This is a lot of money considering the fact that housing loans offered by banks had drastically dropped to below 2.6% since the Great Financial Crisis. Currently, there are many different types of home loan packages in the market but essentially, most of them are way below 2%.
Most Singaporeans are sold on the idea that HDB loan interest rate is very stable, thus this gives them a sense of security and peace of mind. Indeed, the interest rate has been very stable and is not subjected to market fluctuations. But the price that you have to pay [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
Read my articles on HDB and property investments:
- 99-to-1 Tenancy-in-Common
- Frightening HDB rules
- Managing your CPF proceeds from the sale of your HDB to build wealth
- HDB: The thin fine line between Joint Tenancy and Tenancy-in-Common
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This is a very important info that many ppl are not aware. I was caught in this situation when I was 29. Thankfully hdb accept my appeal to continue to use my cpf but on the condition that I fully paid everything at one go.
So for those aspired ppty owners, pls read up and take note.
Hi Vt,
Thank you for your comments. Very surprised that you have reached your CPF Housing Withdrawal Limit at such young age!
Just curious to what limit did CPF Board allow you to continue using your CPF saving? Hope you can share. Thank you.
Regards,
Gerald
https://www.sgwealthbuilder.com
Hi Gerald
Prob some info abt my situation. I got a resale 3rm hdb in 2005 when I was 25. my loan was Ard 90k after the grant n cpf.
The loan repayment period was 10yrs but we did some capital repayment along the way and we managed to cut to 7yrs.
As mentioned above, the capital repayment fr my cpf plus the withdrawal soon reach the cap limit and the cpf sent me a letter to inform us that we had to use cash.
It came as a surprise to my hub n I coz we were totally not aware, or rather I have heard abt this but it did not cross my mind in the impact on me. Esp not at 29.
One good thing for us at that time was that our cpf contribution over the years actually went up. Plus we were prudent in our choice of flat. So we were able to save up a lot in our cpf oa account.
We wrote in, and explained that at the age of 29, we have at least another 20yrs of building up our cpf oa and sa. It helps that our sa is quite positive & the total combine oa in our account is more than sufficient to fully pay up if we decide to make a capital repayment.
I guess the final part on fully paid up is sexy enough to cpf and hdb that they gave us a month grace period to make the withdrawal n paid everything.
That is my story.
The key areas that helped were (1) our balance loan amt is low, (2) we were young- 29 & 30. (3) we have quite a substantial amount in our cpf oa.
Nowadays, whenever I spoke to my younger colleagues, I reminded them of this rule. Surprisingly, none of them were aware.
I was just lucky. We got the hdb at a time before the boom, and we got it low.