CPF Accrued Interest On Housing: What Is It And How To Calculate

Unless you’re incredibly rich or have previously sold a property and bought a new one, most of us would have financed our house with our CPF Ordinary Account (OA) funds. Despite it being all butterflies and rainbows at the start, we now have to pay it off once we’ve sold our house (yikes!). Here’s exactly how much you’ll have to pay back.

You’re not a true Singaporean if you haven’t complained once about having to part with 20% of your hard-earned salary for it to go into your CPF OA. But in times of need, the money in your CPF can come into handy when you make big-ticket purchases like paying for your child’s hefty tuition fee or monthly insurance premiums.

Most of us have probably used a bulk of our funds towards financing our house. Whether it is for the lump-sum downpayment, monthly mortgages or a housing grant that you’ve received, you’re going to have to pay it back to your CPF accounts once you sell your property.

Just treat the government as your loving and prudent parents. If you’ve taken out funds to pay for your house, you’ll have to put the money back with interest to make sure that you have enough for your retirement.

What exactly is CPF accrued interest and what is it for?

When we use an amount of money from our CPF OA to pay for a house, the same amount has to be returned to the account when the property is sold. 

It is extremely convenient to use the funds to finance your house since it seems like you’re using money that you were never able to access. But the catch? There’s an accrued interest on top of the amount that you’ll have to pay back, in place of the funds that would have been accumulated if you had not taken it out for your house.

And if you think housing grants are merely ‘free money’, the sad truth is that you’ll still have to pay back the grant amount that you’ve received to pay for your house into your CPF OA.

What CPF funds do I need to pay back? 

The simple rule is that any CPF funds that you’ve used to finance your house in any way will be included in the amount that you’ll have to return to your CPF accounts. 

These include:

• Initial downpayment for HDB flat/private property
• Stamp duties and legal fees
• Monthly housing loans and lump sum payments
• Housing grants received
• Renovation and repair costs (for private properties only)
• Home protection scheme premiums (for HDB flats only)
• Accrued interest for all the above

How much do I need to pay?

The total amount that you’ll have to pay back to your CPF accounts is the principal amount with the accrued interest. The principal amount is the total amount you took out to finance your house, while the interest rate is the OA’s interest rate at 2.5% per annum. The interest rate is calculated monthly and compounded annually.

The annual compounded interest will be calculated from the time you took out the funds to the time you sell your property. However, you can also choose to pay back the funds before you sell your house at any time and at any amount (up to the principal amount) to save on the accumulated interest rate that will continue to apply until you sell your house.

Most home sellers will have to make the full repayment of CPF funds if the sales proceeds exceed the amount. But If the sales proceeds are not enough to cover the full CPF amount, they do not need to make payment for the shortfall, provided the house is sold at market value. Option fees received in cash by the buyer is considered part of the sale proceeds and have to be returned to their CPF account.

Though it sounds confusing with a load of numbers for you to calculate, you can log into the CPF Online Services to view the accrued interest amount under ‘My Statement’ instead of calculating it manually.

How do I pay off grant money?

After the property is sold, the proceeds from the sale of the flat will be used to pay back the mandatory amount into your CPF account, along with the accrued interest. 

Likewise, if the amount is still not enough, you won’t have to pay for the shortfall.

The grant money that you’ll put back into your CPF account will mostly be transferred into your OA, though if you receive a grant of more than S$30,000, the funds will be diverted into your CPF Special Account (SA), Retirement Account (RA) and Medisave instead of your OA.

When can I pay back the CPF funds?

It’s mandatory to pay back the CPF funds once your property is sold.

However, if you have spare cash on hand, you can always choose to repay earlier under a voluntary housing refund without incurring any penalties, unlike other loans like home equity loans. In fact, it is recommended to pay back the sum in full earlier so you don’t accumulate more interest over time.

You can choose to refund any amount, in partial or in full, but it is capped at the principal amount with accrued interest. This means that you are unable to make additional top-ups to your CPF OA if the amount exceeds the principal amount you took out to finance your home. 

To do so, simply submit an application online or through the myCPF mobile app.

Case Study A: Mrs Yong

To make things simpler, we’ll look at case studies of two different individuals. The first persona is Mrs Yong who took out a total of S$150,000 from her CPF OA to pay off her housing loans, and received a housing grant of S$50,000 under the Enhanced CPF Housing Grant (EHG) by the government in January 2021.

After the minimum occupancy period (MOP) of five years, she decides to sell her house in January 2026. The accrued interest is calculated at a prevailing rate of 2.5% per annum and accumulated for five years. The accrued interest is also compounded yearly.

Let’s see how much she has to pay back.

Case study B: Mr Tan

Similarly, Mr Tan also used S$500,000 of his CPF funds to pay the lump sum of the house in January 2021, and did not receive any grant. He moves out after five years, but decides to put back his funds in full via the voluntary housing refund after two years (in January 2023) to avoid accumulating more interest. Therefore the accrued interest is calculated for two years.

In this case, Mr Tan has to pay:

Should I still use CPF OA to pay for my property? 

Though many might think it’s better to tap into their salary and savings to pay for their monthly mortgage or the downpayment for the house, we beg to differ. Though it can save you the 2.5% accrued interest, using your CPF funds will free up more cash to make investments that can earn you way more than 2.5%, helping you grow your money in the long run.

However, if you’re self-employed and do not have much funds in your CPF OA, then cash might be the better option (if not the only option) to finance your home.