Using CPF To Purchase Property
CPF OA funds can be used to pay for the following:
Downpayment - Your CPF savings can be put towards your downpayment. Do note, however, that you might still required to put up some cash.Portion of the purchase price 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.
Home loan repaymentsYour 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.
Legal fees and stamp dutyYou 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.
Home Protection Scheme feesHDB 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 you can useSome property buyers might face limits as to how much of their CPF funds can be put towards a property purchase.There are two types of limits that can affect you.
Valuation LimitYou have the purchase price of your property, which is what 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.Withdrawal LimitThe 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.There is another catch. While the WL allows you to withdraw CPF funds over and above the VL, if you are under age 55, you can only withdraw this extra 20% above the VL if you have set aside the current Basic Retirement Sum (BRS) in your CPF OA and SA. If you are over 55, you’ll have to meet the BRS in your RA, SA and OA.
Relaxing of CPF rules for older flatsChanges 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.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.
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