cpf vs home loan

CPF vs. Home Loan: Which Is Better for Home Loan? 2023

Singapore’s mortgage costs are rising, with fixed home loan rates climbing to 3.85%. At this rate, some property buyers may think of using their Central Provident Fund (CPF) savings instead of paying in cash via a home loan. But which is a better choice? 

In essence, paying your property using cash or via a bank loan is still better as your CPF is best intended for retirement needs. While you may choose CPF, ensure that you replenish this fund as soon as possible to protect your retirement benefits. Still, your best option depends on your unique circumstances and current finances.

If you are a new home buyer, this article will help you learn everything about these two options and decide better which one is best for you.

See Also: HPS Coverage

Can CPF be Used for Housing Loans?

You can use CPF OA fund to pay for your home loan, regardless of whether you prefer to borrow from HDB or a bank, or plan to get an HDB flat or a private property. Still, this will depend on the buyer’s age, the type of property and loan, and the remaining CPF balance. 

You may also use a mixture of cash and CPF, to keep the remaining funds in your CPF earning. However, doing this will also have an impact when you sell your property later on. Such that, you will have to pay your remaining loan and pay back your CPF funds including accrued interests.


Why Choose CPF?

Repaying a home loan using CPF is a popular option for many Singaporeans. The reason for most is due to convenience and the ready availability of funds. Using CPF to pay for your housing loan in Singapore comes with many other benefits such as:

  • Reducing the amount of cash required for the down payment.
  • Lower monthly mortgage payments.
  • Lower interest rates compared to bank loans.
  • A more convenient and manageable way to pay for your housing loans.

CPF offers various schemes and options, such as the CPF Housing Grant and the CPF Ordinary Account (OA) Savings, which can help you save on buying costs. However, keep in mind that using CPF to pay for your housing loans reduces your retirement funds.

young couple holding figure of house

CPF Coverage

Your CPF savings may be used to pay for a part or the whole of your purchase, subject to CPF limits. You can calculate this limit using the CPF Housing Usage Calculator. The actual amount to be used is also subject to the CPF Board’s approval and depends on the member’s actual savings.

Below is a list of items you can use your CPF OA savings for.

1. The Down Payment

If you are taking an HDB loan for a BTO or resale flat, you can use your CPF to pay the required 15% down payment. On the other hand, those who are taking bank loans may use CPF to pay up to 20% of the required 25% down payment. Leaving you to pay the remaining 5% in cash.

2. The Remaining Balance

You may also use your CPF OA savings to pay for the remaining portion of the purchase price that is not covered by the housing loan.

3. The Monthly Installments

Your CPF OA savings can also be used to service the monthly installments of your HDB or bank home loan. However, there is a cap on much CPF you can use if you are taking a bank loan. 

To use your CPF OA savings to pay for your HDB loan installments, you will need to apply by:

  1. Visiting the HDB branch office and completing an application form.
  2. HDB will forward the application to the CPF board for approval.

To use your CPF OA savings to pay for bank loan installments or for private property purchases, you need to submit a request online by: 

  1. Visit CPF’s website.
  2. Go to MyRequests>Property

4. Other fees

The following fees can also be paid using your CPF:

  • Legal fees
  • Valuation fees
  • Administrative fees
  • Buyer’s Stamp Duties

Typically, these fees need to be paid upfront but may later on be reimbursed using your CPF OA savings. 

What are CPF Accrued Interests?

CPF accrued interests are interests earned on your CPF Ordinary Account (OA) that have not yet been withdrawn for your housing loan payments. This interest can be compounded at 2.5% per annum or 3.5% for the first S$30,000 of your CPF balance. The interest rates are computed based on your balances across your CPF accounts. 

To quickly check your CPF account’s accrued interest:

  1. Log in to your CPF account
  2. Click on the MyCPF tab.
  3. Navigate to the Account Summary option and find MyStatement

CPF Withdrawal Limit

There are also limits to consider, whether you are buying a new BTO flat, a resale flat, or a private property.

  • Withdrawal Limit. Currently capped at 120% of the valuation limit of the property.
  • Valuation Limit. This limit is the lower of the purchase price or valuation at the time of purchase.

Check the table below for the current limits between an HDB loan and a bank loan:

Bank Loan

HDB Loan

BTO flat

Valuation and withdrawal limit applies No Limit

Resale flat

Valuation Limit

Private Property

Not applicable


Pros and Cons of Using CPF

Below is a list of some pros and cons of using your CPF monies for your home loan to help you decide better.


  • Using your CPF savings leaves you more cash at hand. 

With an additional cash flow, you will have more cash to spend and also more to invest.

  • Using your CPF savings allows you to take charge of your finances and be more prudent.

Since you are using your retirement fund to finance your home, the decision pushes you to save from your income and find other ways to grow your money.


  • Using your CPF for your housing loan reduces your retirement fund. 

This reduction affects the compounding power at a stable 2.5% of your CPF savings. Thus, doing this will make you lose an excellent opportunity to grow your retirement nest egg. The more funds are withdrawn, the lesser the interest earned on your CPF account.

  • You’ll need to refund the CPF accrued interest once you sell your property.

Having to refund the accrued interest after selling your property means you’ll be receiving lesser cash proceeds.

Advantages and Disadvantages of Using Cash for a Home Purchase

Home buyers who want to preserve their CPF savings and use cash via a home loan to pay for their home purchase will also find many advantages. 

Advantages of using cash instead of CPF:

  • Preserves the CPF for other uses such as for healthcare and retirement needs.
  • You may transfer unused CPF savings into your Special Account to earn at higher interest rates.
  • Helps avoid CPF withdrawal limits, penalties, and repaying accrued interests.
  • Paying in cash via a home loan provides flexibility in terms of repayment schedule.
  • If you use your CPF savings and sell your property in the future, all the proceeds will be refunded back to your CPF. Thus, using cash prevents a negative cash sale when you sell your property in the future.

Still, there are a few disadvantages of using cash via a home loan instead of CPF:

  • Paying everything in cash reduces the borrower’s available cash for emergency needs.
  • Results in a higher overall borrowing cost of the home loan.
  • Limits the borrower’s ability to take advantage of CPF housing grants or other special benefits.

money invest coin jar contract

Best Home Loans in Singapore 2023

In September last year, HDB announced that the loan-to-value (LTV) quantum for HDB loans had been lowered from 85% to 80%. There will also be a wait-out period of 15 months for private homeowners who want to buy a resale flat.

With tightened limits and stricter criteria on HDB loans, the best option for some borrowers is to get a bank loan. Check out the table below for some of the best bank loan options you may consider this 2023. 

Fixed Interest Rates


First year interest rate (fixed)

Lock-in period


3.65% 2 years


4.25% 2 to 5 years



2 to 3 years

OCBC 4.3%

1 to 2 years

UOB 4.5%

2 years


Floating Interest Rates


First year interest rate (floating)

Lock-in period

DBS Bridging Loan (no lock-in)

4.25% p.a. None

Citibank 3M SORA

2.67% + 0.65% p.a. 2 years

Maybank 3M SORA

2.67% + 0.80% p.a.

1 year

OCBC Eco-Care Home Loan (3M SORA) 2.67% + 0.98% p.a.

1 year

UOB 3M SORA 2.67% + 0.70% p.a

2 years


Repaying Home Loan Using Partial CPF and Partial Cash

Another option for home buyers is to use partial CPF and partial cash. This method allows you to experience both options and maximize certain benefits while minimizing risks. 

Here’s what you can do to maximize this option:

  1. Pay more cash if your home loan has lower interest rates than CPF’s 2.5%. This way, you maximize your CPF saving’s earning potential.
  2. On the other hand, pay more CPF if the interest rate of your home loan is higher than CPF. 
  3. If you are using more CPF to pay your loan, make sure to invest your cash in an investment that yields higher than CPF’s 2.5% interest rate.

FAQs on Using CPF for Home Loans

1. What are CPF Housing Grants?

Some of the Housing Grants that can help you with your resale flat purchase, if you are eligible:

  • CPF Housing Grant Scheme. Qualified resale flat buyers may get up to S$50,000.
  • Enhanced CPF Housing Grant (EHG). First-timer families may get up to S$80,000, 
  • EHG (Singles). A couple comprising a first-timer and a second-timer may get up to S$40,000.
  • Proximity Housing Grant (PHG). If you are a resale flat buyer and want to live with your parent or child, you may get up to S$30,000. On the other hand, if you want to live nearer (within a 4-kilometer radius) to your parent or child, you may get up to S$20,000. 
  • CPF Housing Grant for Resale Flats (Singles) – First-timer orphaned siblings and families with non-residents may get up to S$80,000.
  • Top-Up Grant – for those who availed of the CPF Housing Grant for Resale Flats (Singles) and are now married.

2. Can I use my CPF Savings to Pay for Home Renovations?

No. CPF savings can not be used for home renovations or home repairs and can only be used to purchase a home property.

3. How Much Does CPF Cover for Housing Loans?

The amount of CPF you can use for your housing loan depends on the withdrawal limit. This withdrawal limit is capped at 120% of the valuation limit of your property. 

4. Should I Pay for a Mortgage using CPF?

You should pay your mortgage using CPF if you don’t have adequate cash and are not ready to take on any loan. Otherwise, avoid using your CPF savings, as it is best intended for your retirement funds.


Choosing between paying in cash, CPF, or a mix of both will ultimately depend on your financial health. Keep in mind that whatever option you pick may still come with risks or drawbacks. It is always wise to consult a qualified financial advisor to help you make a sound decision.

Key Takeaways

  • Pay with cash via a home loan if your finances are sound and you can repay the monthly installments diligently. 
  • You can also pay in cash if you have money saved to purchase a home.
  • Use your CPF savings if you have enough funds in your OA account or if you need cash liquidity and don’t want to use your cash savings.
  • Opt for a mix of both cash and CPF to maximize the benefits of both. 

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