How to Use CPF to Pay for a Housing Loan

Loans repayments can be tricky for both first-time and experienced borrowers, especially after the initial cash outlay. Fortunately, it’s possible for Singaporeans to tap into our CPF OA accounts to ease expenses.

Additionally, when managing loan repayments, it's important to consider various options available. Personal loans can provide flexibility in handling unexpected expenses, while home loans offer long-term solutions for property investments. By leveraging CPF OA accounts, Singaporeans can effectively navigate their financial commitments and optimize their resources.

Here’s a rundown on how you can do that. 

CPF Ordinary Accounts 

You can use funds in your Ordinary Account (OA) to pay for a number of things – housing, education, investments, and insurance. For housing loans specifically, your OA funds can cover the following:

• The purchase of a new HDB flat, private, or residential property
• Down payments
• Stamp duty and legal fees
• Home construction loans
• The purchase of a vacant land (specifically for private properties) 
• Home Protection Scheme premiums (solely for HDB flats)

The CPF Housing Usage Calculator can help you get an estimate on how much you could use to offset your loan payments. Details you need to provide include your property purchase date, your co-owner’s date of birth, lease-related information, and the valuation price. 

For existing homeowners, log into the Home Ownership dashboard to discover the available sum you can use for your housing payment.

Check the eligibility requirements to meet at the official HDB or Urban Redevelopment Authority websites.

Ways you can use your CPF OA funds to pay for your housing loan

1. HDB loan or owning a HDB unit without loan financing

If you’re going for this option, all you have to do is fill out and sign a CPF withdrawal form at the HDB office itself. It’s that simple.

2. Bank loan or owning a private property without loan financing

In this regard, you need to get a lawyer to submit your request with a Letter of Authorisation, Declaration, Consent, and Agreement from you. The CPF funds will be available once you’ve completed all legal documentation, and paid the following:

• Downpayment in cash for a minimum of 5% of the lower purchase price or valuation price at the time of purchase
• Any balance purchase price that goes beyond the property value (this is aside from the CPF lump sum and housing loan payments)
• Option fees 

3. Instalment payments with CPF

Any application where you opt to either start, repay, or revise your instalment payments with CPF has to be done online. If you have a HDB loan, log in your request through the HDB website. The same requests for bank loans can go through the option eService: Use CPF for my property in My Request - Property.

What happens when you sell your property?

Imagine this – you have an opportunity to sell your house, and there you are thinking about the cash windfall that will flow into your account.

But, there’s a catch.

According to the CPF Board website, you need to refund the principal sum you took from your CPF account when you sell your house. This is inclusive of the accrued interest. This interest sum is calculated based on the exact same interest you stood to earn had you kept the funds in the CPF account itself.

What happens to the refund? 

It goes into your Retirement Account, topped up to your Full Retirement Sum. If there is a surplus, this would be paid to you in cash. Log into your SingPass account to find out the exact figure of your CPF refund upon selling your house.

What happens when you’re selling your property at a price that’s insufficient to cover your CPF refund and accrued interest? 

Thankfully, you would not need to fork out the shortfall on your own, as long as you sell the property according to its market rate or higher. 

Option fees you receive upon selling your property also count as part of your property’s selling price. This also forms the CPF refund sum which must go back into your CPF account before the sales transaction is complete. 

The distribution of CPF refunds will be split between you and your co-owner(s), and this will depend on:

• The kind of property being sold
• The period when it was refinanced or purchased

If you and your co-owner are above the age of 55, the sum refunded into your CPF savings account will go towards meeting your Full Retirement Sum under the Retirement Account.

Why should you consider doing voluntary CPF refunds?

There are many benefits from doing a voluntary refund when you’ve used your OA funds for a home purchase. By doing so, you:

• Gain from CPF interest rates.The bigger the sum of your voluntary housing refund, the larger your retirement savings will be.
• Reutilise your CPF savings. If the need arises for you to use your CPF savings for other CPF-approved needs or schemes, you’d be able to use your funds again (subject to calculation and limits).
• Lower your CPF refund sum when you sell your property. During the refund process as mentioned, you’re likely to pay less when you sell or transfer your property (additional terms may apply).

Should you use your CPF funds to pay off your home loan?

There are pros and cons in using your CPF funds to pay your home loan. When you make payments with your CPF, you have more cash in hand you can use for other purposes, like giving your home a makeover or keeping funds for emergencies.

The consequences run along the lines of having to pay for the accrued interest from the time you withdraw your CPF for the home loan payment, to possibly affecting your retirement fund planning. There’s also a possibility of running into negative cash sales, which means that the proceeds of your home would firstly cover your home loan or HDB home loan, followed by the CPF refund you’d need to pay. Your chances of getting profits will essentially be slimmer.

Ultimately, the choice (and the one living by it) is yours. Always ensure that you practice financial prudence before making any major decisions regarding your money. Opt for the best and most realistic choice and if need be, shift gears.