Using CPF Funds for Property Purchase

What can I use my CPF Funds for?

Your CPF funds can be used to pay for stamp duty, legal/conveyancing fees and mainly for the down payment of the purchase, as well as the subsequently monthly repayment. You can decide how much you wish to allocate simply by logging into your account using your Singpass. You have the flexibility to change these arrangements at any time.

If you are buying a HDB flat using the HDB concessionary loan, up to 90% of the flat value can be financed by the loan. The remaining 10% can be paid with the CPF Ordinary Account (CPF-OA).

If you are taking a bank loan, regardless of whether it is for a private property or a HDB flat, you may loan up to 80%. Out of the remaining 20%, 15% can be paid with the CPF Ordinary Account (CPF-OA)/cash and 5% must be by cash.

(Read more about the pros and cons of taking HDB versus bank loan in this article by moneysmart.sg)

Conditions for the use of your CPF funds

Some conditions for the use of your CPF funds for property purchases include:

You may not use CPF Ordinary Account (CPF-OA) for properties with remaining lease of less than 30 years old.
If the property’s remaining lease is less than 60 years, but at least 30 years, ensure that you age plus the remaining lease is not more than 80 years.
There is a cap to the amount of CPF funds you can use to pay your bank loan called the CPF Withdrawal Limit (WL). This cap is currently 120% of the Valuation Limit (VL) of your property. The VL means the purchase price or the valuation of the property, whichever is lower.
Once your usage reaches the VL, you would need to set aside the Basic Retirement Sum before you can continue using the CPF funds up to the maximum WL of 120%

Example:

Mr Tan buys a property at $550,000.
The property is valued at $500,000 so his VL is $500,000.
His maximum CPF usage, (the WL), is $600,000 at 120% of the VL.
Once he has used up to $500,000 of his OA funds, he will need to set aside the Basic Retirement Sum before he can continue using his OA funds.

For more information, click HERE for HDB flats and HERE for private properties.

Should I use all my CPF for my property repayments?

The CPF was primarily for retirement. The more you put into property, the less you have to retire on.
CPF contribution rates will be reduced with age, especially after 50 years old.
If you have commitments on your CPF, do be mindful how much you use. Items may include insurance premiums or offspring’s tertiary education fees.
Remember, you will need to be insured under the Home Protection Scheme when you use your CPF for the monthly repayment of your property loan
An important point to note is that the CPF pays an interest rate of 2.5%. Using cash is preferable as it will allow you to earn a higher interest rate (than bank savings account interest rate) in your CPF savings.
Upon the sale of your property, you are required to return the CPF funds with accrued interest back into your account.
It is also prudent to leave some cash reserves in your CPF for rainy days and emergencies so that you are able to repay your mortgage on time.