Along with good health and happy family, every Singaporean’s ultimate dream is to own a house they can call their own. Some wants a simple HDB flat while there are those who desires a landed property near the city. However, acquiring a property is such a challenging goal to deal with because it easily drains one’s monetary resources with straight down payments and monthly financial obligations. But for many Singaporeans, using CPF for buying properties is deemed to be the most feasible solution.
But what exactly is Central Provident Fund? How can you use it to acquire your dream home? How to use CPF when buying property? What are the pros and cons? Is there a limit or restrictions? How much can you get out from your CPF savings? All these things and more discussed on this guide to using Central Provident Fund.
What is Central Provident Fund?
Created in 1955 as a compulsory savings scheme to assist workers to fund their retirements, the Central Provident Fund or CPF has gone from being a solely retirement plan to a comprehensive savings system that covers both healthcare and housing needs. It is like an indestructible piggy bank that appreciates over time depending on the account.
The Central Provident Fund is a mandatory social security savings plan for working Singaporeans and Permanent Residents. It is used to primarily fund retirements, healthcare and housing essentials. Think CPF as an employment based comprehensive savings scheme, with employers and employees contributing a certain amount or percentage as mandated by the government.
With you and your employer both contributing to the CPF fund, these contributions go into four accounts:
- Ordinary Account (OA) – for housing, CPF insurance, investment and education.
- Special Account (SA) – for investment on retirement-related financial products.
- Medisave Account (MA) – used for hospitalization and medical insurance.
- Retirement Account (RA) – created for 55-year-old individuals to cover basic retirement needs.
Every year, thousands of Singaporean use their Central Provident Fund Ordinary Account (CPF OA) to help out on buying properties. Either for down payments, home loans and property fees; you can use this saving to fund your real estate purchase.
How to Use CPF When Buying Property?
Contrary to the common belief, you can use your CPF to fund both public and private properties. Whether it’s a 4-R HDB flat, executive condo, private condo, apartment or landed homes – you can use your Central Provident Fund to aid on these purchases. Though, keep in mind that there are certain rules and eligibility differences reliant on the type of property you wish to acquire.
Depending on whether you will be using CPF under the Public Housing Scheme (PHS) or Private Properties Scheme (PPS), each of them is govern with different requirements.
Using CPF for Buying Properties – Public Housing Scheme
If you are eyeing a new HBD flat or even a resale HDB housing unit, you can use your CPF to:
1. Finance the down payment of the property.
- When using HDB concessionary loan, there is no down payment needed.
- Whereas bank loan requires 20% down payment with 15% coming from your CPF savings while the remaining 5% should be paid in cash.
2. Service the monthly housing loan installment.
- Either through HDB concessionary loan or bank loan
3. Cover extra fees such as:
- Stamp duty, legal fees, survey, home protection scheme fees, and other related charges
However, do note that using your CPF to purchase HDB units do have eligibility requirements. You CANNOT use your CPF savings under the Public Housing Scheme (PHS) if you’re:
- Buying an HDB flat with a remaining lease of less than 30 years.
- Buying an HDB flat with a remaining lease of less than 60 years; but at least 30 years and your age plus the remaining lease of the flat is less than 80 years.
How Much CPF Savings Can You Use?
Your CPF is not made to fund real estate properties alone, remember that it is also used to support your retirement and healthcare needs. To this end, you cannot exhaust all your CPF savings when buying a home. There’s a limit on using CPF for buying properties.
Valuation Limit (VL) – is the market value of the property at the time of purchase, whichever is lower.
- Example: if the HDB flat cost $100,000 at the time of purchase but the property is valued at $80,000, the VL is set at $80,000.
Withdrawal Limit (WL) – is the 120% of the VL and this is the maximum amount of CPF you can use to finance the flat.
- Example: if the HDB flat has a VL of $80,000, the WL is $96,000. Anything beyond this amount should be service with cash.
Public Housing Scheme – Additional Notes
- For those who will be purchasing a new flat from HDB, you will not have any limits and you can use your CPF until the loan is fully paid.
- You can use your CPF to finance more than one property but there are restrictions you need to bear in mind.
- When you turn 55, your OA and SA are combined to create your Retirement Account or RA. This would impact the amount you need to refund on your CPF savings in case you decide to resell your HDB flat.
- You can loan up to 90% of the purchase price through the HDB concessionary loan. Alternatively, bank loan can offer up to 80% of the purchase price which is subject to terms and conditions.
Using CPF for Buying Properties – Private Properties Scheme
You can use your CPF to fund not just HDB flats or public housing units but private properties as well. The Central Provident Fund can be utilized to:
1. Pay the purchase price of the private property.
2. Service the monthly housing loan installment.
3. Repay the construction loan.
4. Cover extra fees associated with purchasing/constructing the property.
As stated earlier on this guide to using Central Provident Fund, there are eligibility requirements when using CPF to finance a private property. You CANNOT use it for Private Properties Scheme (PPS) if:
- Buying a private property with a remaining lease of less than 30 years.
- Buying a private property with a remaining lease of less than 60 years; but at least 30 years and your age plus the remaining lease of the property is less than 80 years.
- You are a single person with a non-related single and have used CPF for an existing property.
- You are a married person buying a property with a non-related single.
How Much CPF Savings Can You Use?
When it comes to housing limits on the amount of CPF savings you can use to fund a private property, the same “valuation limit (VL) and withdrawal limit (WL)” applies. Just like when buying HDB flats, you need to keep in mind the value of the private property at the time of purchase as well as the 120% VL which is the WL.
Private Properties Scheme – Additional Notes
- The amount of CPF you can use is lower when buying a private property with a remaining lease of less than 60 years but at least 30 years.
- When using CPF to finance private properties, keep in mind the other items you are funding with your CPF like children’s education, insurance premiums, retirement funds and healthcare benefits.
Central Provident Fund Housing Grant
Known as the CPF housing grant, this is a subsidy given by the government to eligible home buyers as a form of assistance when acquiring public housing units. It reduces the need of bigger housing loan making home ownership easy and affordable.
The CPF housing grant is only applicable to HDB flats, DBSS flats and executive condominiums. For private properties, there are no grants given by the government except for executive condominiums which is a public-private hybrid type of housing.
Different Types of CPF Housing Grant
Depending on the type of property you wish to acquire, citizenship, status in life and monthly income; there are different types of CPF grant you can use on the purchase of your home. Check them out after the jump.
Grant for HDB Flats
1. First-Timer Applicants – up to $40,000 depending on household income. You can likewise receive an Additional CPF Housing Grant (AHG) and Special CPF Housing Grant (SHG) of up to $40,000. When combined, first-timer applicants can get up to $80,000 housing grant in total.
2. Second-Timer Applicants – eligible second-timer applicants can get as much as $15,000.
3. First-Timer & Second Timer Couple Applicants – FT and ST couples are allowed to receive up to $20,000. They can equally receive $20,000 AHG as well as SHG that when combined, can yield a total housing grant as high as $40,000.
4. Non-Citizen Spouse Scheme – up to $20,000 grant is given depending on the income. A $20,000 AHG and SHG is similarly applicable that when combined can bring up to $40,000 housing grant in total.
5. Single Singapore Citizen Scheme – the same as with Non-Citizen Spouse Scheme, a total of up to $40,000 housing grant can be claimed with AHG and SHG combined, though this depends on the household income.
6. Joint Singles Scheme/Orphans Scheme – can be as high as $40,000 with a bonus AHG and SHG of up to $40,000. In total, buyers can get as much as $80,000 CPF housing grant.
Grant for DBSS Flats
1. Family Grant – up to $30,000
2. Half Housing Grant – up to $15,000
3. Singles Grant – up to $11,000
4. Additional Housing Grant (AHG) for Family – up to $40,000
5. Additional Housing Grant (AHG) for Singles – up to 20,000
6. Proximity Housing Grant (PHG) for Family – up to $20,000
7. Proximity Housing Grant (PHG) for Singles – up to $10,000
Grant for Executive Condominiums
1. Family Grant for Singapore Citizen and Singapore Citizen Household – up to $30,000
2. Family grant for Singapore Citizen and Permanent Resident Household – up to $20,000
3. Half Housing Grant for First Timer/Second Timer Couple – up to $15,000
Guide to Using Central Provident Fund – Additional Housing Grant Info
- Eligible home buyers can use the “Staggered Down Payment Scheme” to pay the down payment within 2 installments. 1st is when you sign the Agreement for Lease while the 2nd installment is paid during key collection.
- For those who are planning to buy a new HDB flat and sell the current flat, the “Contra Facility Scheme” will help reduce your cash expenditures, mortgage loan and be able to collect the flat key while selling your first-owned unit.
Indeed, there are many ways on how to use CPF when buying property. Future home buyers do have an option to avail the low-interest mortgage loan being offered by the HDB concessionary, use CPF housing grant to finance public properties, or utilize the CPF savings to pay off the levies of private properties. Keep in mind that the above guide to using Central Provident Fund is bounded by certain eligibility requirements that buyers need to take note of.