Typing “How much CPF can I use for my condo monthly instalment?”, “Can I use CPF to buy condo?” and “How much CPF can I use for condo?” in Google Search throws up tons of articles weighing the pros and cons of financing your home with your CPF savings. Those who plan to buy an HDB flat may also have the same question.
Conventional wisdom has many Singaporeans opting to repay their home loans in cash while holding on to their CPF funds for retirement. So, the question is: Should you use cash or your CPF savings to pay off your housing loan? Let’s find out.
If you need more tailored home financing advice or want a second opinion on whether to pay off your loan in cash or CPF savings, speak to our Mortgage Experts.
Using CPF vs Cash to Repay Home Loan
There are a few main ways you can pay the installments on your home loan, such as cash or your CPF Ordinary Account (OA) savings. You can also opt for a combination of the two by using a mixture of cash and CPF. You can use CPF for your condo down payment and HDB flat downpayment too.
By using your CPF OA savings, you are forgoing the practically risk-free OA interest rate, which is currently 2.5% p.a.
In addition, those under 55 are entitled to an additional 1% on their first $20,000 worth of OA savings. Meanwhile, those aged 55 and above are entitled to an additional 2% on their first $20,000 worth of OA savings.
On the other hand, if you pay in cash, you could forgo the returns you might receive on that money if you invested it.
What You Can Pay for Using CPF
Under the CPF Board’s Housing Scheme, you can use your CPF funds to pay for HDB flats or private residential housing. The funds in your CPF OA can also be used for the following types of transactions:
- Direct payment of new and resale HDB flats or private residential property to the HDB, developer or seller
- Repayment of housing loan or monthly instalments
- Payment of stamp duty, legal fees, and other costs related to purchase or mortgage
- Payment of upgrading costs for your HDB flat under the HDB Main Upgrading Programme (MUP) or Town Council Lift Upgrading Programme (TCLUP)
You cannot pay for the following using your CPF savings:
- Option fees, booking fees, deposit to HDB/HDB sellers
- HDB resale levy
- Construction works, improvements, repairs, or renovations
- Monthly service and conservancy charges
- Non-housing loans (e.g. renovation loans)
- Cash Over Valuation (COV); portion of the purchase price above valuation price
- Reimbursement of payments made to property developers or sellers out of personal funds
Paying HDB Home Loan with CPF
When you take an HDB loan to finance your HDB flat, you need to pay a 25% downpayment based on the home’s purchase price, while up to 75% can be borrowed from HDB. The downpayment from your HDB loan can be made with money from your CPF OA account.
For HDB-granted loans, there are specific rules when using your CPF to fund your property purchase. If the youngest owner using CPF to pay is covered by the HDB lease until the age of 95, the following withdrawal limits apply:
| Type of flat | Type of loan | Maximum amount of CPF that can be used |
| New HDB flat | No loan | Up to the purchase price of the flat |
| New HDB flat | HDB loan | Up to the purchase price of the flat or housing loan amount |
| Resale HDB flat | HDB loan | Up to the purchase price or valuation price of the flat, whichever is lower (if you cannot set aside the Basic Retirement Sum)
Or up to the housing loan amount (if you can set aside the Basic Retirement Sum) |
If the lease does not cover the youngest owner using CPF till the age of 95, the maximum amount of CPF OA savings that can be used will be pro-rated. You can check the amount available using the CPF housing usage calculator.
Besides the CPF withdrawal limits, buyers are also limited by factors such as the Total Debt Servicing Ratio (TDSR) and Loan to Value (LTV) ratio.
Paying Bank Home Loan with CPF
The answer to “Can I use CPF to buy a condo?” is yes. You can use your CPF OA savings to pay for your condo, as your CPF funds can be used to repay bank loans for both HDB and private property. You can even use your CPF to pay your condo down payment.
You’re also probably wondering, “How much CPF can I use for my condo monthly instalment?” For buyers taking out a bank loan, regardless of whether they’re financing an HDB flat or private property, the CPF withdrawal limits in the previous section will apply.
When buying private housing or taking out a mortgage loan from a commercial financial institution (not HDB), the maximum LTV limit is only 75% of the home’s selling price. At least 5% of the down payment must be made in cash. The remaining 20% should be paid with a combination of savings in your OA and/or cash.
So, while you can use your CPF to fund a condo purchase, pay attention to the allowable CPF condo down payment amounts.
Which Should You Use to Repay Your Home Loan, Cash or CPF Savings?
So now you know the answer to “How much CPF can I use for my condo monthly instalment?” and “Can I use CPF to buy a condo?” or any property for that matter. The question is how to repay your monthly instalments.
1. Using CPF to Buy a Home Means Lower Savings in the Future
One key reason you may pass up on using your CPF to buy a condo or HDB flat is the possibility of losing out on having a larger retirement fund in the future. Instead of partly paying for a house, you can maximise your retirement funds by voluntarily diverting money from your OA to your Special Account (SA).
While your SA can only be used in old age and to invest in retirement-related financial products, it benefits from a higher interest rate. The Singapore government pays extra interest on the first $60,000 of your combined balances (capped at $20,000 for OA).
Based on current CPF interest rates, you could earn 2.5% p.a. if you leave your funds in your OA and 4% p.a. if you transfer your money to your Special Account (SA). This does not include additional interest.
| Age | Extra interest |
| Below 55 years old | 1% per annum on the first $60,000 |
| 55 years old and above | 2% per annum on the first $30,000, 1% per annum on the next $30,000 |
Say you took this route and shifted monies in your OA to SA. It’s possible to get a hefty retirement fund of at least $1 million when you reach 65 years old or even 45 years old. This potential windfall is thanks to the compound annual growth rate (CAGR), especially if you consistently maximised the mandatory and voluntary contributions of $37,740 annually.
But if you choose to shift nearly all your money from your OA to SA, you will need to fund your property purchase mainly in cash when paying the down payment and servicing the monthly mortgage instalments.
In the absence of other sources of retirement money, there is a stronger case for preserving one’s CPF savings and using cash to repay one’s home loan. However, if you plan on having multiple sources of retirement income and do not need to rely on CPF payouts, you will have more latitude to use your CPF savings to finance your property.
On the other hand, by using CPF to pay towards your home, you can free up more liquid cash, enabling you to use it for emergencies. Also, you could use your cash to invest and possibly receive higher returns than you would on your CPF savings, albeit at a higher risk.
Just note that the high interest rate environment will affect your returns depending on the investments you are making.
So you can use your CPF for your condo or HDB flat purchase, but be mindful of what you may miss out.
2. Hitting Withdrawal Limits When Using CPF to Buy Condo
While the answer to “Can I use CPF to buy a condo?” is yes, another reason to be cautious about using your CPF savings to buy a private condo is that you can deplete your OA to the point of hitting the CPF withdrawal limit.
A possible risk for automatically repaying the monthly housing loan instalment via CPF OA is that the home buyer may neglect to check how much money remains in their OA.
In this situation, you don’t want to get mail from the Central Provident Fund informing you that you can no longer use your OA to hit the cap. And to make matters worse, you then realise you barely have enough leftover cash to service your next monthly mortgage instalment.
This could lead to late payments, which in turn will result in penalties. In the worst case, your home might get foreclosed if you default on repaying your housing loan. So, if you have concerns about “How much CPF can I use for my condo monthly instalment?” consider this aspect when figuring out how to finance your condo purchase.
Housing Withdrawal Limit When Using CPF to Buy a Condo, Resale HDB and BTO Flat
If you bought a BTO flat, the withdrawal cap doesn’t apply to you. You can use your OA to pay for your property purchase and monthly housing loan instalments until the money in the OA runs out. After that, you need to pay in cash.
But if you bought a resale HDB flat or private property like a condo, there is a ceiling on the maximum amount you can take from the OA to fund your home purchase. This withdrawal limit also considers not just the principal amount of the mortgage but the interest you pay as well.
Nonetheless, you can be exempt from the limit when you meet the Basic Retirement Sum, currently at $102,900 (for those who turn 55 in 2024). However, if you only set aside the Basic Retirement Sum, you will only be entitled to the lowest monthly lifelong payout when you retire.
3. Automatic Housing Loan Repayment via CPF Can Lead to Missed Savings
Another potential danger of neglecting to keep track of your housing loan repayments is that you could miss chances to lower your monthly mortgage instalments if you took a loan from a commercial bank instead of HDB.
This is because there are no housing loans in Singapore, wherein the interest rate doesn’t change over the entire tenure of the mortgage. Typically, housing loans offered by banks here only have a fixed coupon for the first three or five years.
Thereafter, it shifts to a floating rate based on some financial benchmarks like the Singapore Overnight Rate Average (SORA). For the layperson, this means the interest rate of your housing loan can increase or fall over time, depending on the local and global economic situation.
More importantly, keep in mind that most home loan packages in Singapore increase the interest rates around the fourth year.
Financial institutions or mortgage brokers sometimes suggest a housing loan package with a low coupon that eventually increases. These lenders are doing so on the assumption that you are financially literate enough to refinance your home loan when the interest rates start increasing significantly.
However, if you neglect to monitor your monthly loan instalments and the prevailing interest rates in the market due to being complacent about the automatic CPF deduction, you may forget to refinance when interest rates shift.
Additionally, if you don’t frequently check how much is getting deducted from your CPF OA, then it’s possible that you could have been paying more than you ought to. This is a bad move for property investors, as the higher interest cost will slash your earnings when you resell your home after holding it for several years.
4. Using CPF to Buy Condo Can Result in Losing Out
If you use your CPF to buy a home instead of cash, you could be losing out financially. CPF savings earn higher interest rates than banks and are entirely risk-free.
Paying your monthly instalments in cash prevents money wastage unless you have a business or venture that earns a larger Return on Investment (ROI). So unless you have a more lucrative use for your on-hand cash, it’s better to utilise it to pay for your home instead of utilising your savings in your CPF OA. And if you want to invest, you should ideally use cash, not CPF.
Oftentimes, we use cash to finance inessential luxuries, such as overseas holidays, eating out at fancy restaurants, or the latest gadgets and gizmos. But if you are tapping your CPF savings because your cash on hand is used for business ventures or investments with stellar returns surpassing the CPF interest rate of 2.5% or 4.0%, then continue to do so.
So Should You Use Your CPF to Buy Private Property?
When the government established CPF, its aim was to provide a sufficient retirement nest for Singaporeans and ensure citizens had enough savings for important things such as education, housing, and healthcare.
Nonetheless, the CPF OA is intended to partly fund home purchases, so there’s nothing wrong with using your CPF to buy a condo or an HDB flat. Whatever you choose, make sure those choices align with your financial needs and goals.
If you’re unsure of which to choose or need more home financing advice, speak to our Mortgage Experts. They can guide you towards making an informed decision. Best of all? It’s free!
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