Buying property in Singapore can be expensive but residents are fortunate to be able to use CPF monies to fund property purchases. A recent CPF Board Annual Report showed that the amount of funds withdrawn to finance housing purchases grew 26.5% year-on-year, hitting S$21.9 billion in 2021. Of this, just over half went into buying HDB flats, and were withdrawn by around 750,000 individuals. There are, however, opportunity costs and it is worth considering these before tapping into retirement savings.
Considerations when Setting Aside CPF Funds for Property
CPF funds can be used for particular payments including the property downpayment, legal fees, stamp duty or monthly mortgage repayments but there are potential risks of utilising the fund’s savings, not least as it lowers the amount left for retirement. Other points to consider are:
- Funds can only be used for freehold properties or remaining leases over 20 years and there is a limitation on the age of the buyer(s);
If an individual is still paying a mortgage off beyond the age of 55, contribution rates fall and this could impact the amount of money in the CPF:
| Employee’s Age | Contribution Rates from 1 Jan 2016 (for monthly wages >S$750 | ||
| By Employer (% of wage) | By Employee (% of wage) | Total (% of wage) | |
| 55 and below | 17 | 20 | 37 |
| Above 55 to 60 | 13 | 13 | 26 |
| Above 60 to 65 | 9 | 7.5 | 16.5 |
| Above 65 | 7.5 | 5 | 12.5 |
Source: CPF
- There is a limit on how much CPF savings can be used to finance a home purchase:
- New HDB: no limit on HDB loan
- Resale HDB: whichever is lower – valuation or property price at the time of purchase, after setting aside Basic Retirement Sum (BRS), can use CPF entirely – HDB loan
- HDB flat/private property: whichever is lower – valuation or property price at the time of purchase, after setting aside Basic Retirement Sum (BRS), can use a further 20% for the property – bank loan
- CPF funds must be returned if you intend to sell the property in the future (in addition to paying off the outstanding home loan).
Senior Partner and Head of JTJB’s Property & Conveyancing Department, Mabel Tan, commented: “The CPF Board generally offers more interest than most banks, however, in recent years this hasn’t been the case. The CPF was initially created to provide for retirement needs and it has now evolved – some examples of other usages include education fees and MediSave. Individuals should be aware that the more CPF funds put towards the purchase of property/monthly instalments for a housing loan, the lower the overall retirement savings”.
Using CPF savings in a home purchase is possible but does come with some hurdles. These can be addressed by, where possible:
- Paying mortgage instalments in cash instead of using CPF funds;
- Moving CPF funds from an ordinary account (“OA”) to special account (“SA) to enjoy higher interest rates;
- Refunding some of the cash used for a property purchase back to a CPF account, without selling the property. This will help re-build funds and earn more compound interest.
Tan added: “There can be benefits in paying off a mortgage in cash instead of with the CPF. Some members prefer to use CPF funds for approved investments whilst others prefer to have the freedom to use their cash. Money in the CPF can only be used for specific purposes”.
What Happens when you Sell the Property?
If CPF funds were tapped to purchase the property then the buyer will have to refund the principal withdrawn, plus accrued interest, to their CPF account.
“Bear in mind that when a member sells their property, any CPF savings used towards the purchase will have to be refunded with the accrued interest on the amount used”, Tan advised.
In Singapore we are fortunate to be able to allocate money from our retirement funds towards big-ticket purchases such as first and – in some instances, second homes, but it is vital that we understand what we can use the money for and how to go about using it effectively.
For more information, please contact:
 | Mabel TanSenior Partner JTJB Singapore Office |  | Ting Chi YenPartner JTJB Singapore Office |
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 | Joseph TanConsultant JTJB Singapore Office |  | Tio Siaw MinAssociate JTJB Singapore Office |
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