Discover the extent to which your CPF savings can be utilized for the acquisition of a HDB home in Singapore, as well as the various expenses for which these funds can be utilized.TLDR
When considering purchasing property in Singapore, whether as a local or foreign investor, understanding the utilization of CPF funds, loan options, and associated expenses is crucial. Learn about the maximum CPF funds available for buying HDB or private property, how CPF savings can be used for HDB or bank loans, and the implications of selling your HDB flat. Additionally, discover the eligibility criteria for Singapore permanent residents (PRs) to use CPF for purchasing HDB flats. Explore various scenarios based on loan types, property ownership status, and CPF regulations to make informed decisions regarding property investment in Singapore.
What is the extent of CPF usage allowed for purchasing a HDB home or private property?
The Central Provident Fund (CPF) is an important financial resource in Singapore that helps citizens meet their housing needs. Whether you want to buy a Housing Development Board (HDB) flat or a private property, it is crucial to understand how to effectively use your CPF funds for purchasing a house.
This guide offers detailed information on different aspects of utilizing CPF funds for buying property.
The utilization of CPF funds for property purchases is contingent upon various factors, including the type of loan (bank or HDB) and the remaining lease duration of the property. The extent to which savings in your CPF Ordinary Account (OA) can be utilized differs depending on the specific scenario you fall into. In this regard, it can be used for downpayment, monthly mortgage instalments, and associated expenses.
If you are obtaining an HDB loan to finance the purchase of a Build-to-Order (BTO) or Sale-of-Balance (SBF) flat, you and any co-owners can utilize your respective Ordinary Account (OA) savings to cover the initial 10 percent downpayment and the remaining purchase price.
For resale flats or Design, Build, and Sell Scheme (DBSS) flats with a lease that extends until the youngest owner reaches at least 95 years old, you can use your OA savings to pay for the balance after making a cash deposit. However, the amount of OA savings you can use is limited to the lower of the purchase price or the valuation price at the time of purchase.
If you still have an outstanding housing loan, you can continue using your OA savings to repay it, as long as you have enough set aside in your CPF accounts to meet the applicable Basic Retirement Sum (BRS). The BRS requirement can be fulfilled using savings from your Retirement Account (RA), Special Account (SA), and OA.
As co-owners, you can only utilize your individual OA savings to cover the cost of the property once the minimum five percent down payment has been settled in cash. This also applies to the portion of the buying price that surpasses the property’s market value, and the lesser amount between the buying price or the valuation price at the point of purchase, subtracting the housing loan and approved CPF lump sum contributed towards the property, as well as the booking fee for HDB flats and the option exercise fee for resale HDB flats.
If you don’t possess any property currently financed by your OA savings, you’re permitted to use your OA savings up to the lower amount between the buying price or the valuation price when bought. Your OA savings can be harnessed to pay off any remaining housing loan provided you have reserved the relevant Basic Retirement Sum (BRS) in your CPF accounts. The total OA savings all owners are allowed to utilize will increase by 20 percent of the lower amount between the buying price or the valuation price when purchased, after which no more CPF usage is permissible.
For those who already have a property financed with OA savings, they can only draw from their OA savings to buy a new property once the applicable BRS (S$99,400 for 2023) has been secured in their CPF accounts. The OA savings can still be used until the collective CPF usage by all owners reaches the lesser amount between the buying price or the valuation price at the point of acquisition.
Stamp duty is a tax that is charged on property transactions. It is not allowed to be paid using CPF funds. This tax must be paid in cash and is a required expense when you own property.
If you do not intend to take a loan and do not have any existing property financed with OA savings, you may use your OA savings to pay for the purchase up to the lower of the purchase price or the valuation price of the property at the time of purchase. No further CPF usage is allowed thereafter.
If you have an existing property financed with OA savings, using your OA savings is only allowed after setting aside the applicable BRS in your CPF accounts. OA savings can be used until the total CPF usage by all owners reaches the lower of the purchase price or the valuation price of the property at the time of purchase, after which no further CPF usage is allowed.
If you are a permanent resident in Singapore, you can use your Central Provident Fund (CPF) money to buy public housing apartments, known as HDB flats. However, do note some conditions apply. Your CPF funds can only be used to purchase HDB flats that have been previously owned, and you need to fulfill certain requirements. You either need to be part of a family with a Singaporean citizen or buying under the fiance/fiancee scheme, indicating that if you’re a single permanent resident, acquiring a resale HDB flat is not possible.
You can use your CPF savings to pay off both HDB and bank loans. These funds will be taken from your CPF Ordinary Account. If you’re planning to use a bank loan, remember to let your attorney know that you intend to use your CPF savings for repayment when you apply for the loan.
To utilize your CPF savings for settling loan installments, it’s essential to submit an application and grant permission to the CPF Board to initiate direct payments to either HDB or your bank. This procedure requires you to file a GIRO application which enables the automatic deduction of your monthly loan payments from your CPF Ordinary Account (OA). Moreover, you are given the liberty to modify the sum and even halt your OA savings towards your monthly dues or alternatively, employ them in executing partial or complete capital repayments.
In the process of transitioning from your existing HDB flat to another subsidised HDB, you’ll be required to fulfill the obligation of an HDB resale levy. This specific levy is subtracted from the proceeds of your sale and in the case of any deficit, a cash payment would be necessary. The payment of this levy is strictly in cash, with no provision for offsetting it via CPF savings. Should you decide to let go of your current flat before acquiring a new one, be prepared to settle the resale levy in cash as a prerequisite to gaining ownership of your subsequent flat.
If you decide to sell your HDB flat, the money you receive from the sale will be used to pay back the CPF savings that you used to buy the property. This includes both the amount you initially withdrew and the interest that has accumulated, which is currently set at a rate of 2.5% per year.
Alternatively, you have the option to voluntarily repay some of the CPF savings that you used for your property. This will result in receiving more cash when you sell your flat, as the amount you need to repay will be lower. The refunded CPF savings can also be used for various CPF-approved schemes, such as the CPF Investment Scheme (CPFIS), if needed.
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
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