Understanding CPF Usage For Property (2020)
Updated: Oct 11
Using CPF for property purchase?
Seriously you are asking me this question? We have been dying to use our monies in our CPF account! Using it on property is a legit way and why not?
Before we go on to discuss the hot topic of whether to use CPF for property, I want to explain some CPF policies and regulations for property usage. This will help us in making a better decision whether to use CPF for property purchase.
CPF Contribution and Allocation Rates -
Ordinary Account (OA), Special Account (SA), Medisave Account (MA)
We can use CPF from our OA for purchase of HDB and private properties under Public Housing Scheme, Private Properties Scheme and Home Protection Scheme. These are the schemes applicable for purchase of HDB flat, private properties and mortgage-reducing insurance respectively. Please refer to the CPF website links for more information.
The bulk of our CPF contribution goes to OA when we are younger. As we grow older, more contribution goes to SA and MA. This is to prepare us for retirement needs.
What is CPF Interest Rate?
CPF monies is 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 property purchase?
Purchase of HDB Flats
There are limits on the amount of CPF you can use for HDB purchase. It depends on the following:
Buying a new or resale HDB flat;
Remaining lease of flat can cover the youngest buyer who is using CPF for the flat to at least 95 years old. If it cannot cover, CPF usage will be pro-rated;
whether you are using HDB concessionary loan or bank loan to finance the purchase of the flat.
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) you own; and
Remaining lease of property can cover the youngest buyer using CPF to at least 95 years old. If it cannot, CPF usage will be pro-rated .
You can use CPF Housing Usage Calculator to compute how much CPF you can use for your property.
CPF Withdrawal Limits
There are 2 types of limit to how much CPF you can use for property purchase, namely 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 only continue to use your CPF to service the monthly loan instalment if you can set aside the Basic Retirement Sum.
Otherwise, you have to use cash to service the monthly loan instalment.
Read more on Basic Retirement Sum, Full Retirement Sum (aka Retirement Sum) and Enhanced Retirement Sum on CPF Retirement Sum.
** 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 set at 120% of the property's valuation limit.
Can I continue using CPF to service my monthly loan instalment after 55?
A Retirement Account (RA) will be created when you turn 55. The balance in your OA will then be transferred to RA. You can use the balance in your OA to service your monthly loan instalment after you set aside the Retirement Sum.
You can also choose to pledge your property with CPF and use the balance of the Basic Retirement Sum 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 you have set aside the Retirement Sum.
If you continue working after 55, your new CPF OA contributions can also be used for housing loan repayments.
Can I use my CPF for an ageing property?
You can use CPF for buying property as long as the remaining lease of the property can cover the youngest buyer to age 95. If not, CPF usage will be pro-rated.
Go to CPF Usage Calculator to find out how much CPF you can use by keying in your age and the remaining lease of the property you intend to purchase.
You cannot use CPF for a property with remaining lease of less than 20 years.
Buying Multiple Properties Using CPF
You can use the excess of Basic Retirement Sum in your OA to buy multiple properties.
However, if none of your properties can covers the youngest buyer till age 95, you will need to set aside the Full Retirement Sum (ie. 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 to their CPF OA whatever amount they have used, plus the interests that would have been accumulated if you have not used the CPF.
You can view the amount to be refunded to your CPF account by logging into CPF website.
Do I need to top up the CPF shortfall if I sell at a loss?
The formula for calculating sales proceed 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 CPF OA and be used to offset the purchase price. As per the regulations pertaining the usage of CPF for property purchase, these amount together with accrued interest, have to be returned to your CPF OA when you sell the flat.
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!
About The Author
Vivian is a highly experienced real estate agent who has been in the industry for 18 years.
Over the years, she has transacted numerous property deals including HDB and private properties. She is well-versed in policies and regulations involving the sale and purchase of residential properties. She has also handled many transactions involving complicated situations like contra, divorce, administration / probate cases, and decoupling / part-share purchase.
Vivian is also a mother to 2 boys. Being a real estate mom allows her to spend more time with her children as they were growing up. Both boys are avid footballers representing their schools and clubs. She loves watching their games and hardly miss a game whenever they play.
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 real estate industry.