Owning a home or property is a common goal among many young professionals in Singapore. And true to it, many can achieve this dream through CPF, other government-assisted schemes, and private housing loans.
Yet, with the financial crisis brought about by the pandemic, many are burdened with being able to sustain their monthly housing instalments. And because owning a home is an important and long-term goal, some changes must be adopted so as not to lose this property.
While your Central Provident Fund (CPF) is intended mainly for your retirement, you can also use it to pay for your home. So, if your cash flow is greatly affected and you want to use or adjust your CPF savings to pay for existing housing loans, this guide will help you through the process.
Significant Reasons to Change Your CPF Housing Payments
Many Singaporeans have been using their CPF savings to pay for their homes and property mortgage. After all, this is how you benefit from the fund while retirement years are still far. Yet, there are some critical scenarios where one might need to adjust how their CPF is used for housing payments and protect their retirement funds simultaneously.
1. You get retrenched, sick, or unable to work
Singaporeans can tap into their CPF Ordinary Account account to ease housing mortgage expenses. Also, CPF allows you to set aside up to S$20,000 from your Ordinary Account (OA) as a safety buffer just in case you get unemployed or sick while paying a home loan.
This strategy can preserve your retirement fund while still being able to pay your monthly housing mortgage repayment.
At the beginning of a housing purchase, you can try to use the CPF housing usage calculator to know your housing usage limits. This feature allows you to estimate the funds you will be able to use should your finances be significantly impacted by unwanted events.
2. You already consumed the allowed limits on your CPF usage
While it is true that you can use your CPF to pay for an outstanding housing loan, there are withdrawal limits (WL) in your CPF OA. With this rule, you would not be able to use available funds in your OA account once you reach this limit. Currently, this limit is 120% of your property’s valuation limit (VL).
3. There are changes in allocation rates as your reach age 35
At 35 years old, there is a gradual shift in your allocation rates wherein CPF will allocate more funds for your special account (SA) and MediSave (MA) account. These changes help your funds grow as you transition to the next life stages.
Check the table for relevant changes between the ages 35 to 55:
|Employee’s member’s age||Allocation Rates (% of Wage)||Contribution Rate (% of Wage)|
|Ordinary Account (OA)||Savings Account (SA)||MediSave Account (MA)||Employee||Employer|
|35 to 45||21||7||9||20||17|
|45 to 50||19||8||10||20||17|
|50 to 55||15||11.5||10.5||20||17|
With this, your SA and MA, are being gradually built for long-term retirement purposes and healthcare needs.
4. Reaching Your 55th Birthday
On your 55th birthday, CPF creates your retirement account (RA). When this happens, CPF will transfer balances from your ordinary account (OA) and savings account (SA) to this account. When this happens, you can either opt to withdraw your balances or keep them in your CPF accounts to earn interest.
If you still think of using your housing repayments after this age, you can use RA savings above your Basic Retirement Sum (BRS). Still, you have to reserve some of your OA savings for this. Moreover, this decision will lead to a lower retirement sum for you, so you must carefully decide and plan.
Want to Adjust Your CPF Payment? Follow these 5 Steps
You can start, stop, or adjust your housing instalments CPF housing repayments. So, if you need to do so, here is a quick step-by-step guide on making changes to your monthly CPF deduction via the CPF portal.
1. Log in to your CPF account
Simply go to https://www.cpf.gov.sg/member. Log in using your Singpass password or via the Singpass app by scanning the QR code. You can also download the Singpass app while on this page.
If you are servicing a bank loan, you must apply for the CPF Housing Scheme. On the other hand, for an HDB loan, you can submit a request through the HDB portal.
2. Go to the homeownership page
After logging in to your CPF account, go to myCPF Online Services. Next, go to My Requests > Property > Use CPF for my property.
3. Choose your property type
Select the property you need to pay or make changes to. You should be able to see the property that you own and the property’s address. You can do this for more than one property, provided you have enough OA savings.
4. Follow on-screen instructions and make necessary changes
Choose an option for the change or adjustment you want to make. You choose any of the following to your home instalments:
- Revise monthly instalments
- Cease monthly instalments
- Make lump-sum payments
- Make arrears payments
- Repay housing loan fully
If this is the first time you will use your CPF for your monthly options, you will not see the revise monthly instalment option. Review, confirm and submit changes.
5. Choose the bank to which you are paying your monthly instalment
For the last step, choose the bank you want to pay and the monthly instalment amount to pay from the OA account. The amount should not be higher than your housing instalment each month. This option is available for those who are revising their monthly instalments.
For first-timers, choose the financier from the options, the monthly instalment, and the effectivity date.
Guide to Using Your CPF OA Home Loan Repayment
You can use CPF to a maximum usage based on your property type and the loan type you availed. However, the government has limits on using your CPF savings to protect your retirement funds.
Here are two essential terms to understand in this process:
- Valuation Limit (VL)
VL is the lower of the purchasing amount or market valuation when you bought the property.
For example: Purchase Price = S$500,000
Market Valuation = S$550,000
Then, the Valuation Limit is S$500,000, which is the lower value.
- Withdrawal Limit (VL)
The WL is capped at 120% of the valuation limit. Using our example above, the WL is computed as 120% of S$500,000, which is at S$600,000.
How much CPF OA savings you can is shown in the table below:
|Property Type||Loan Type||Maximum CPF Usage||Additional Requirements|
|The remaining lease covers the youngest owner until 95||Remaining lease does not cover the youngest owner until 95|
|New HDB Flat||HDB Loan||No Limit||Pro-rated VL||N/A|
|HDB Resale Flat||HDB Loan||Valuation Limit||Pro-rated VL||Can withdraw above VL and up to the loan amount if BRS is met|
|HDB Flats (New or Resale)||Bank Loan||Valuation Limit and Withdrawal Limit||Pro-rated VL||Can withdraw above VL and up to the withdrawal limit if you meet the BRS.|
|Private Property||Bank Loan||Valuation Limit and Withdrawal Limit||Pro-rated VL|
Other Things to Consider when using CPF for Your Home Loans
Once the limits on your CPF have been used up, you will have to pay your remaining loan instalments in cash.
When you sell your property, CPF will also require you to repay the CPF funds used to finance the property. This amount includes the borrowed principal plus accrued interest over time.
Your Retirement Funds are Affected
Current interest rates for your ordinary account are significantly at 2.5%. So, if you take out money from your CPF and use it for housing needs, you lose the opportunity for your fund to grow from its compounding interest.
Check out our guide on how to refinance home loan.
CPF is essential in helping you sustain your monthly home instalments, especially during difficult times. This benefit is regardless of whether your property is an HDB flat or a private purchase. Still, careful planning and considerations are needed to protect and preserve your retirement funds.
- You should still weigh the pros and cons of using your CPF funds for your housing instalments.
- Using your CPF funds for housing needs could mean lower retirement funds in the future.
- If you want to use your CPF monies for home repayments, you must be prudent enough to place adequate investments and other sources of income and savings. Learn more about CPFIS or CPF investment scheme.
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