A guide to using your CPF to buy housing

The first time most Singaporeans think about using their CPF savings is when they plan to buy a house. We all aspire towards home ownership, and CPF can help us reach that goal of owning our dream home.

How much of your CPF can you use?

You can use your CPF Ordinary Account (OA) savings to buy a new or resale HDB flat, or private residential property, as long as the remaining lease on the property is more than 20 years. However, the government has put in place certain limits on using CPF savings for housing to ensure you will have sufficient savings to meet your retirement needs.

Firstly, there are two important terms you need to know:

1. Valuation Limit

The Valuation Limit is the lower of the purchase price or market valuation at the time of purchase.

For example, if the purchase price of your property is $400,000, and its valuation is at $450,000, the Valuation Limit will be $400,000. Similarly, if the purchase price was $450,000 and its valuation is $400,000, the Valuation Limit will be $400,000.

When the total CPF you have used to pay for your home reaches the Valuation Limit, you have to set aside half of the prevailing Basic Retirement Sum (BRS) in your CPF accounts before you can withdraw more CPF savings to service the outstanding housing loan. This is to ensure that your CPF monies is used for its primary function ?to safeguard your retirement. The Valuation Limit does not apply to a new HDB flat financed with a HDB concessionary loan.

2. Withdrawal Limit

The Withdrawal Limit, capped at 120% of the Valuation Limit, is the maximum amount of CPF monies you can use to pay for your home.

For example, if the Valuation Limit of your home is $400,000, the Withdrawal Limit will be $480,000.

When the CPF savings used to fund your property reaches the Withdrawal Limit, no further use will be allowed, and you may need to use cash for your remaining mortgage payments. It is important to keep track of your Withdrawal Limit so that you can plan accordingly. The Withdrawal Limit does not apply to a new or resale HDB flat financed with a HDB concessionary loan.

Limits on CPF usage based on different types of properties

There are different limits based on the type of property and loan:

1. Using a HDB loan to buy a new HDB flat

You can use your entire CPF-OA balance for loan repayment.

2. Using a HDB loan to buy a resale flat

If the lease covers the youngest owner to age 95, the Valuation Limit will apply. When the total amount of CPF savings withdrawn reaches the Valuation Limit, you can only use cash for the balance of the loan repayments.

If the lease does not cover the youngest owner to age 95, a prorated amount from the Valuation Limit will apply. When the total amount of CPF savings withdrawn reaches the prorated Valuation Limit, you can only use cash for the balance of the loan repayments.

3. Using a bank loan to buy a HDB flat or private property

If the lease covers the youngest owner to age 95, the Valuation Limit and Withdrawal Limit will apply. When the total CPF you have used to pay for your home reaches the Valuation Limit, you have to set aside half of the prevailing Basic Retirement Sum (BRS) in your CPF accounts before you can withdraw more CPF savings to service the outstanding housing loan. When the total amount of CPF savings withdrawn reaches the Valuation Limit, you can only use cash for the balance of the loan repayments.

If the lease does not cover the youngest owner to age 95, a prorated amount from the Valuation Limit and Withdrawal Limit will apply. When the total CPF you have used to pay for your home reaches the prorated Valuation Limit, you have to set aside half of the prevailing Basic Retirement Sum (BRS) in your CPF accounts before you can withdraw more CPF savings to service the outstanding housing loan. When the total amount of CPF savings withdrawn reaches the prorated Valuation Limit, you can only use cash for the balance of the loan repayments.

Additional use of CPF savings for housing

In addition to paying for all or part of the purchase price of your house and servicing mortgage payments, you can also use your CPF OA savings to cover miscellaneous costs such as stamp duty and legal fees, and other related costs such as flat upgrading.

If you're looking to buy more than one private property, either for investment or residential purposes, you can also use any remaining CPF OA savings. However, the amount of CPF savings you can use will be determined by when your second or subsequent property was purchased.

CPF Housing Grants

Eligible home buyers can receive further CPF housing grants of up to $80,000 for their home purchase. However, keep in mind that these grants come at a cost and you have to pay accrued interest on the grants. If you sell your property, you need to pay back the grants (as well as other CPF amounts used to fund your home purchase) into your CPF accounts with accrued interest.

CPF Housing Grants for HDB flats

CPF Housing Grants For Executive Condominiums (EC)

Executive Condominiums (EC) are a hybrid between public and private housing, where they are built and sold by private developers, but sold at a lower price due to subsidised land prices. ECs are still subject to HDB regulations.

There are two CPF Housing Grants available for EC purchases: Family Grants and Half-Housing Grants.

Depending on your monthly household income and applicant status, you may receive grants of up to $30,000.

With the various grants and subsidies given by the government, owning your dream home may no longer be a distant goal.

You can check out the CPF housing usage calculator to help you understand how much CPF you can use for your home and when the maximum CPF OA monies that you can use for your home.

Explore the Endowus Fin.Lit Academy to learn investment fundamentals, grow your wealth, and get smart with your financial and retirement planning.

<divider><divider>

This article is for information purposes only and should not be considered as an offer, solicitation or advice for the purchase or sale of any investment products. It is recommended that you seek financial advice as to the suitability of any investment. Whilst Endowus Singapore Pte. Ltd. (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors.

Any opinion or estimate above is made on a general basis and none of Endowus, nor any of its affiliates, representatives or agents have given any consideration to nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Opinions expressed herein are subject to change without notice.  

Investment involves risk. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Past performance is not an indicator nor a guarantee of future performance.

Please note that the above information does not purport to be all-inclusive or to contain all the information that you may need in order to make an informed decision. The information contained herein is not intended, and should not be construed, as legal, tax, regulatory, accounting or financial advice.