CPF Housing Refund Singapore | Plan Voluntary CPF Refund?

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Emptying your CPF Ordinary Account (OA) to pay for property and mortgage payments? This is one way to make use of your CPF savings before reaching retirement age. However, you may have heard that you should “refund” your own CPF account by repaying the money you’ve used for housing. Do you really gain anything by doing so? In this blog, we discuss CPF housing refund Singapore. Read on to find out more on this.

CPF Housing Refund 

In the vast majority of cases in Singapore, CPF housing refunds occur only when a person sells a home purchased with CPF savings. Once the home has been sold and the sale proceeds have been received from the buyer, the original owner must refund the full amount of money. This essentially means the money withdrawn to pay for the property, plus interest, to his or her CPF accounts. It includes any CPF Housing Grants you may have received. If the property is sold for less than its market value, the seller must make up the difference in cash.

When you make a voluntary CPF Housing Refund, you are repaying this money without first selling your home. During the COVID-19 pandemic, there has actually been a surge in the number of people requesting voluntary CPF housing refunds, with the number tripling in the last year. Yes, you read that correctly! People are willingly putting their money in CPF! But why is this so?

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Benefits of a Voluntary CPF Housing Refund Singapore

It turns out that there are some advantages to requesting a CPF Housing Refund. When you sell your home, you must refund any CPF funds you used, plus interest. Not just any interest, but the interest rates set by the CPF Board. The current CPF OA interest rate is 2.5%, which is significantly higher than the interest rates on bank housing loans. When it comes to high-interest rates, being on the receiving end is far preferable to being on the giving end.

By making a voluntary CPF housing refund, you reduce the total amount of interest you must pay. And you also allow your money to accumulate interest in your OA in subsequent years. This also reduces your stress when you eventually sell your property. As you avoid losing a portion of your sales proceeds and discovering that you need to pay back a large amount of accumulated interest.

The Disadvantages of Voluntary CPF Housing Refunding

Making a voluntary CPF Housing Refund may not be as appealing to those who actively invest. If you can earn higher returns on your cash than the CPF interest rate. This is especially true for younger investors who take higher risks, for higher return investments. Another disadvantage of requesting a CPF Housing Refund is that your money is trapped in the CPF system before its expiration date. You won’t see it again until you decide to buy another property or reach the withdrawal age. So, if you’re struggling with cash flow, it might be best to keep your cash on hand.

CPF Refund By Yourself?

If you have the cash to spare, a CPF Housing Refund may be a good idea if you have money lying around that you haven’t set aside for investments that you believe will yield a higher yield than CPF OA interest rates. However, due to the inflexibility of the CPF system, you must ensure that you do not require the cash before requesting the Housing Refund. So, first, you must ensure that you are financially sound. And that you are consistently free of high-interest debt such as credit card balances. Also, you have an emergency fund of cash savings equal to a few months’ worth’s of expenses.

You should also plan ahead of time to ensure that you will not need to raise funds for a large expense such as a car or the birth of a child. Only use the cash to make a CPF Housing Refund in Singapore if you are certain you will not need it.

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