CPF, or the Central Provident Fund is a compulsory comprehensive savings plan for working Singaporeans and permanent residents primarily to fund their retirement, healthcare, and housing needs. The CPF is an employment based savings scheme with employers and employees contributing a mandated amount to the Fund.
It is administered by the Central Provident Fund Board, a statutory board operating under the Ministry of Manpower which is responsible for investing contributions. When it comes to CPF, A very common question among many Singaporeans and PRS is:
Should we use CPF for our property purchase?
Before we start the discussion, let us look at the use of CPF and the limits.
For purchasing of residential property, you can use the monies in your ordinary account to purchase it. However the use of CPF Ordinary Account monies are subjected to some limits, namely Valuation Limit and Withdrawal Limit.
The Valuation Limit (VL) is the lower of the purchase price or the market value of the property at the time of purchase.
The Withdrawal Limit (WL) is the maximum amount of CPF savings that a member can use for the property.
Applicable CPF WL:
|Date when the property was bought or when the HDB loan is refinanced to a bank loan
|1 September 2002 – 31 December 2003
|150% of Valuation Limit (VL)
|1 January 2004 – 31 December 2004
|144% of VL
|1 January 2005 – 31 December 2005
|138% of VL
|1 January 2006 – 31 December 2006
|132% of VL
|1 January 2007 – 31 December 2007
|126% of VL
|1 January 2008 onwards
|120% of VL
As an example, you can see the following infographic from CPF as an illustration on the limits on CPF you can use for a HDB flat with at lease 60 years lease remaining.
Source: CPF board
Use of CPF OA savings beyond the Valuation Limit
If you intend to use you CPF OA savings beyond the valuation limit (VL), you will have to:
If you are below 55 years old:
Set aside the current Basic Retirement Sum (BRS) in your Special Account and Ordinary account
If you are above 55 years old:
To meet the Basic Retirement Sum (BRS) in your Retirement Account (RA), Special Account and Ordinary Account
Most people may think that the use of their CPF OA savings is not subjected to any limit and they can use the CPF OA savings as long as there are monies in the OA account.
Note that once the Withdrawal Limit is reached, you cannot use any more CPF and has to use cash to service the loan. The remaining loan will have to be paid in cash.
In my next article, I will share on the other restrictions of use of CPF OA for property purchase.