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June 28, 2023
All about CPF for my property purchase.
You may use your CPF Ordinary Account (OA) savings to purchase your private residential property under the Private Properties Scheme.
Your CPF OA savings will be released after you have paid the booking fee, required cash down payment and balance purchase price. The balance purchase price is calculated as such:
Balance purchase price = Purchase Price – Required Cash Down Payment – Housing Loan – CPF OA savings approved for use for the property.
There are housing limits on the amount of CPF savings you can use to buy a property. Information on the use of CPF monies is available here.
Click on the FAQ below to find out more
You may use your CPF subject to the Valuation Limit and Withdrawal limit.
The definitions of each of these limits are as follows;
Valuation Limit (VL): It is the lower of the purchase price or the market value of the property at the time of purchase.
Withdrawal Limit (WL): 120% of the Valuation Limit.
When the total CPF withdrawn by all the owners reaches the Valuation Limit, every owner must individually set aside the half of the prevailing Basic Retirement Sum (BRS) in their OA and SA (for those below the age of 55) or their OA, SA, RA (for those 55 and above) if they want to withdraw more CPF to service the outstanding housing loan.
Once homeowners’ usage of their CPF on this property hits the Withdrawal Limit, no further usage of CPF to service this home loan is allowed.
New Rules On CPF Usage And Maximum HDB Loan Amounts For Property Purchases
The latest change in the CPF rules is on the requirement that the property can cover the youngest buyer to at least the age of 95. This is meant to encourage Singaporeans to buy a home that can last for their lifetime.
New Scenario 1: If property covers youngest buyer to at least the age of 95:
CPF Usage: You can use your CPF up to the Valuation Limit (VL).
HDB Loan: You can loan up to 90% of the Loan-To-Value (LTV) Limit.
New Scenario 2: If property does not cover youngest buyer to at least the age of 95:
CPF Usage: You can use your CPF up to a pro-rated amount from the Valuation Limit (VL).
HDB Loan: You can loan a pro-rated amount from the 90% Loan-To-Value (LTV) Limit.
Formula to calculate the pro-rated CPF usage:
You can also use the CPF Housing Usage Calculator to help you gauge the pro-rated Valuation Limit you can use.
Additional Rules That Apply To All Scenarios:
– No CPF usage and HDB loan is allowed for the purchase of any property with remaining lease of 20 years or less.
– For any application to pledge your property to meet the Full Retirement Sum and withdraw additional CPF savings above the Basic Retirement Sum, your pledged property must last you until age of 95. Otherwise, you can just withdraw the first $5,000 from age 55 and 20% of your Retirement Account savings from your Payout Eligibility Age.
You can download a copy of the CPF policy update here.
You can use your CPF on your private property purchase for the following:
- Paying for the lump sum payment for the private property purchase.
- Servicing the monthly repayments of your private property mortgage.
- Paying of stamp duty and legal costs.
If you do not have a loan, you cannot use CPF to pay for the 15%.
but if you do not have a loan, you can still use CPF to pay for stamp duties.
This is because using CPF to pay for stamp duty is different from using CPF to pay for 15%.
However, in the absence of the bank providing the valuation, you might need to appoint an independent valuer to provide a valuation to submit to CPF though.
Ans: No, this is because the law firm will need 7 clear working days to drawdown the CPF funds after submitting the following items to CPF.
- Letter of offer.
- Letter of instructions.
- Valuation report.
After you meet the banker to an IPA, the next step is to submit all the documents the bank requires; ie salary payslip, CPF contribution, NRIC images. Therefrom, the Letter of offer takes about less then a week to generate. – 1 week time.
Once the banker meets you to sign the offer letter, they will ‘batch down’ to their backend for approval and processing. The backend will check against an internal list of the approved law firm in their panel. Once checked, they will send a letter of instructions to that law firm to allow it to instruct them when to drawn down of funds. – 1-2 weeks time.
The bank will appoint a valuer to provide a value of that property. Typically its faster for a desktop valuation and longer for an onsite valuation (for completed property). – less then a week.
So if you cant decide on the loan by the 5-6th week after you received the OTP, you will run the risk of the law firm not being to drawdown your CPF funds to pay for the lump sum.
Its important to note that it takes about 5 weeks for the funds to come back into your OA before the law firm can draw down again to use for your next property purchase.
i.e. There should be 5 weeks apart from the completion of your current sale and the completion of your next purchase.
The amount you can withdraw depends on the balances in your CPF account and the year you reach 55.
| Cash balances in Ordinary Account (OA) and Special Account (SA) at 55 | Amount which you can withdraw at age 55 |
|---|---|
| $5,000 or less | All your Ordinary and Special Account savings |
| Between $5,000 and your Full Retirement Sum | $5,000 |
| More than your Full Retirement Sum | $5,000, or your Ordinary and Special Account savings above your Full Retirement Sum, whichever is higher. |
*You will be able to withdraw the remaining savings in your CPF account after setting aside your Full Retirement Sum. If you are unable to set aside the Full Retirement Sum, you will still be able to withdraw up to $5,000.
The Full Retirement Sum for members turning 55 up to the year 2020 is as follows:
| Birth Year | Full Retirement Sum |
|---|---|
| 1961 | $161,000 |
| 1962 | $166,000 |
| 1963 | $171,000 |
| 1964 | $176,000 |
| 1965 | $181,000 |
Source : CPF
Starting May 2019, you are are not able to earmark any incoming funds, law firm will only be able to apply for funds which you currently have in your OA account.
During the meeting, the lawyer will take your instructions on how much CPF to use and from which account.
You can choose to use ie. your account to pay for Stamp duty and your spouse’s account to pay for the lump sum.
All you have to do is to send/bring along a printscreen of your OA balance and present it to your lawyer.
Depending on the law firm’s SOP, they might have a CPF checklist on top of the CPF application form for you to sign.
No you may not. You can only use your OA for your property purchase.
Only special case that has gotten approval, in rare instances ie for HDB purchase, the buyer was in financial distress and was short of a few thousand to be able to afford the HDB, CPF specially give approval for them to use from SA account.
Once the law firm assist to set up your CPF usage, the monthly installment will be ‘0’ by default.
Purchaser will need to login to their CPF website using their singpass to set the monthly installment limit.
You can download the guide here. Or refer to the following.
If you choose to use CPF later, be it for the progress payment or the monthly installment, take note:
1. You need to use cash all the way until the last few progressive payments towards TOP.
This is because without the mortgage loan, it will be assumed that you are just solely using cash and CPF for your purchase.
(MAS states that the purchaser exhaust all his cash first, before CPF disburse).
2. That the law firm might charge you extra as for the additional work.
The law firm will need to do bankruptcy search, perform additional administrative work ie lawyer to meet you to explain the CPF application, witness your execution for the letter of authorization and declaration, submit to CPF along with the Valuation Report, Letter of instructions and Letter of offer etc.
CPF savings can only be used to buy residential properties. Small Office Home Office (SOHO) developments are approved by URA either for Office or Residential but not for both uses. You may use your CPF savings to buy a SOHO unit only if URA has approved it for Residential use. Therefore, you are advised to check the approved use of the property before committing to any purchase.