Purchase Property Using CPF | Factors to Consider Using CPF Money

Property | Real Estate | Singapore

The first time you’ll use your CPF funds will mostly be to purchase a home. You don’t have to wait until you’re old and wise to access the funds in your CPF account. You can use your CPF OA funds to purchase any type of home in Singapore. For instance, HDB or private homes, resale or under-construction properties, as long as it is not a cardboard box or tent. In this blog, we tell you about factors to consider purchase property using CPF.

In order to use your CPF funds to purchase a home, you cannot simply stand in front of a CPF ATM and wait for the cash to appear. You must understand when and how you can spend this money.

How to Purchase Property Using CPF?

When purchasing real estate, you do not simply hand over a million dollars to the cashier and wait for the change. You will be paying for a number of things at various points. And you will need to know beforehand which of these items you can pay for using CPF OA money. The funds from the CPF OA can be used to pay for the following:

Downpayment

Yes, you can use your CPF funds to pay for your downpayment. However, keep in mind that you may still be required to put up some cash. Buyers of HDB flats who take out a HDB loan can use their CPF OA money for a 10% downpayment. And this can be paid in full with CPF savings. If one of the applicants is under 30 years old at the time of application, then he/she will also be eligible for the Staggered Downpayment Scheme. For buyers of HDB flats who take out a bank loan must make a 20% downpayment. Out of this at least 5% must be paid in cash. For private properties that are under construction development, buyers need to make a  20% deposit. And out of this deposit at least 5% of the money has to be paid in cash.

For those buyers purchasing a resale flat, they need to make a cash deposit of up to $5,000. If you are planning to purchase a private resale property,  a deposit of 5% and an option fee of at least 1% has to be paid in cash.

Pay an Amount of the Purchase not Covered by Home Loans

After you’ve made your downpayment, you can use a combination of cash and/or CPF funds to pay for the portion of the money that your housing loan does not cover. This money will be paid to the seller in a lump sum upon completion. Or when your property is complete and payment is due.

Repayment of a Mortgage

Your CPF OA funds can also be used to pay off your home loan. If you have exhausted your account during the initial stages of your property purchase but continue to receive CPF contributions from your employer on a monthly basis, these contributions can be used to make your monthly home loan repayments. This is true for both HDB and bank loans.

Stamp Duty and Legal Fees

Stamp duty, legal fees, and other administrative fees can all be paid with CPF OA funds. Your lawyer or HDB will demand that you pay these fees. Please keep in mind that this is a reimbursement programme, which means you must have the cash up front before CPF will reimburse you.

Fees for the Home Protection Scheme

Buyers of HDB flats who do not have life insurance that covers their 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, are diagnosed with a terminal illness, or become totally and permanently disabled. Your CPF OA funds can be used to pay your annual HPS premiums. There are restrictions on how much you can use.
Some property buyers may face restrictions on how much of their CPF funds can be used to purchase a home. There are two kinds of limits that can have an impact on you.

Limitation of Value

You have your property’s purchase price, which is what you are paying. Then there’s the market value of your home. The lower of these two figures is the Valuation Limit (VL). So, if you pay $500,000 for a home but the market value is only $450,000, the VL will be $450,000. You can use your CPF money to pay up to the VL, including the downpayment and home loan payments.

Withdrawal Cap

The Withdrawal Limit (WL) is greater than the VL and allows you to borrow more than the VL allows. At the moment, the WL is equal to 120 percent of the VL.

Changes in rules to purchase property using CPF will allow home buyers to purchase older flats with larger CPF loans as long as the property’s remaining lease covers the youngest buyer until the age of 95. Before they can be paid for with CPF funds, HDB flats must have at least 20 years left on their leases.


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