Can I Use CPF funds to pay for second or subsequent residential property?

Can I Use CPF funds to pay for second or subsequent residential property?

If yes, how should I use my CPF funds?

Some of us may desire to finance our retirement or getting another stream of retirement income through property rental income. We may wish to buy more properties so that we can create a passive income by leasing out the properties. 

In fact, after going through many consultation sessions, I found out that some of us may have already finished paying off our current property loan. Now, we may want to utilize the funds sitting in our CPF account right now to pay for another property.

However, the use of CPF funds for the purchase of another property will be subjected to some terms and conditions. Do take note of the conditions here before making the purchase.

From 10 May 2019 and onwards

For properties bought from 10 May 2019 and onwards, the amount of CPF funds that you may use for a second or subsequent property will depend on the remaining lease of the property. 

  1. If the remaining lease of at least one of the properties you own or you are intending to purchase (where you have used CPF savings for the property) can cover you to at least 95 years old:
If you are below 55 years old now,
If you are 55 years old and above now,
You will need to set aside the current Basic Retirement Sum in your Special Account, including the amount used for investments, and Ordinary Account (OA) before you can use any excess savings in your OA for the property.You will need to set aside your Basic Retirement Sum (BRS) in your Retirement Account (RA), Special Account, including the amount used for investments, and Ordinary Account (OA) before you can use any excess savings in your OA for the property. 
You may also use your RA savings (excluding interest earned, grants received from the Government and top-ups made under the Retirement Sum Topping-up Scheme) in excess of your BRS, where eligible.
  1. If NONE of the property you own or you are intending to purchase (where you have used your CPF savings for the property) have a remaining lease that can cover you to at least 95 years old
If you are below 55 years old now,
If you are 55 years old and above now,
You will need to set aside the current Full Retirement Sum in your Special Account, including the amount used for investments, and Ordinary Account (OA) before you can use any excess savings in your OA for the property.You will need to set aside your Full Retirement Sum in your Retirement Account, Special Account, including the amount used for investments, and Ordinary Account (OA) before you can use any excess savings in your OA for the property. 

How can I estimate the amount of CPF funds that I can use now to purchase a second or subsequent property?

You can use the CPF Board calculator to estimate how much CPF funds you can use for your property. Just click on the link here.

How much is the Basic Retirement Sum (BRS), Full Retirement Sum (FRS)?

For Basic Retirement Sum (BRS) and Full Retirement Sum (FRS) amount, you can refer to Table 1 below.

For example, if you turn 55 in 2020, the Basic Retirement Sum (BRS) and Full Retirement Sum (FRS) are $90,500 and $181,000 respectively.

Table 1

Do note that the amount for Basic Retirement Sum (BRS), Full Retirement Sum (FRS) may varies from year to year. From Table 1, you can expect the amount to be increasing year after year.

Should I use cash to refund my current CPF usage? Is it worth to do so?

Let say I have fully paid up my current property using both CPF and cash. I intend to buy another property using my CPF. Assuming I am buying a property that can cover you till age 95 and I am below 55 years old, I will be subjected to the BRS amount. 

Let’s explore both the scenarios if I were not to repay my CPF usage and if I were to do so here:

Without repaying the CPF used for my first property

Cash on hand to buy next property : $100,000

Amount of CPF plus accrued interest used for my current property : $30,000. 

CPF in my Ordinary account : $100,000 

CPF in my Special account : $40,000

The amount of CPF I can use for the second property = $100,000 + $40,000 – $90,500 (based on year 2020 BRS) = $49,500

Total cash on hand and CPF that can be used for the second property = $100,000 + $49,500 = $149,500

Repaying the CPF used for my first property

If I refund all the CPF used for the first property using $30,000 cash, after paying back to my CPF account, I can use all the amount in my CPF OA to pay for the next property.

The amount of CPF I can use for the second property = $100,000 + $30,000 (amount refunded back to CPF) = $130,000

Total cash on hand and CPF that can be used for the second property = $130,000 + $70,000 = $200,000

We can see that in the above scenarios, by repaying the CPF used for my first property, I can “free” up more CPF funds for the second property purchase. 

Opportunity cost of using CPF for property investment

The funds in our CPF account do serve multiple purposes. One of the most important purpose is to finance our retirement. Therefore, do give some serious considerations before using any of your CPF to purchase a property. Do read my article on the opportunity cost of using CPF funds vs cash for your property purchase, so that you can maximized the return from your assets. 

I understand that everyone’s situation is unique and different. If you do have any questions on your property, you can request for a session with me through the form below.

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