The Central Provident Fund (CPF) is an investment that Singaporeans can use to meet their retirement needs.
After all, your CPF is a mandatory social security savings scheme that is funded by contributions from employees and employers.
You can use your CPF contribution to pay for other needs like healthcare, education, housing, and retirement.
You can benefit more from your CPF by using it to pay for your home, especially if your retirement years are still far away.
However, in some cases, you may need to know how to adjust the CPF payments for your housing loan.
In this article, we will explore how to use your CPF for paying monthly installments. We will also look at the reasons that may necessitate you to know how to adjust your CPF payments for your housing loan.
How Do I Use My CPF To Pay My Monthly Installments?
Your CPF fund is made up of four accounts as below:
Ordinary Account (OA)
The funds in this account can be used to pay for retirement, housing, insurance, and investments.
Special Account (SA)
You can use the funds in this account for old age, retirement, and investment.
Your MediSave account will be used to pay for medical expenses and medical insurance.
Retirement Account (RA)
This is the account from which you will get your retirement payouts from when you get to 55 years of age or older.
Withdrawing Your CPF To Pay For Your Housing Loan
Now that you understand the composition of your CPF fund account, let us break down how you can use your CPF to pay your monthly installments.
It’s important to note that you can only pay your home loan monthly installments from your CPF OA.
To service your home loan using your CPF funds, you must have the CPF home protection insurance coverage.
The amount you can withdraw from your CPF depends on the type of property you have. When withdrawing from your CPF, the valuation or the withdrawal limits will apply.
Here is the definition of both limits:
- The valuation limit is the lower of the purchase price and the market value of your home.
- CPF withdrawal limits let you borrow 120% of the valuation of your property.
For instance, if the purchase price of the home you want to buy is $500,000 and the valuation is $530,000, the valuation limit will be $500,000 while the withdrawal limit is $560,000.
You get the valuation limit as below: 120% of the valuation ($500,000).
Let us look at how much CPF funds you can withdraw depending on the type of property.
Build To Order (BTO)/New Flats
There is no limit on the amount you can withdraw from your CPF fund OA to pay for a BTO or new flat.
HDB Resale Flats
For resale flats, the amount you can withdraw is capped at the valuation limit without the need to meet the basic sum requirement (BRS).
If you want to withdraw more from your CPF OA, you will need to meet the BRS requirement.
The amount you can withdraw in this case is capped at the housing loan amount.
The basic sum requirement (BRS) refers to the payout CPF members receive to be able to pay for basic living expenses.
They are adjusted gradually to ensure the payout caters to the cost of living.
Below is a summary of the current BRS.
|Type of Retirement Sum||RA savings required at 55||Estimated payout for those above 65 years old|
|Basic retirement sum||$96,000||$750- $810|
|Full retirement sum||$192,000||$1,390-$1,490|
|Enhanced retirement sum||$278,000||$2,030- $2,180|
If you are below 55 years old, a BRS of $96,000 in both your CPF SA and the OA applies. Those over 55 years old can withdraw any amount from the following:
- RA funds over the BRS
- OA funds in your account before your 55th birthday
- Any OA contribution from work
The amount you can withdraw is capped at the housing loan limit.
It’s important to note that if you are 55 years old or older, you can only use your OA and RA savings over BRS.
You can use the funds to buy a studio apartment or opt for a short-term lease on a two-room flexi flat with a lease of 15–45 years from HDB.
How Much CPF OA Funds Can You Withdraw For Monthly Bank Loan Home Installments?
If you opt for a bank loan for a HDB flat or private property, you can use your CPF OA funds to pay your monthly loan installments.
You can withdraw up to the valuation limit without meeting BRS. To withdraw beyond the valuation limit, you will need to meet BRS and stay within the capped limit.
The withdrawal limit is 120% of the valuation limit.
If you are below 55, the current BRS of $96,000 in your CPF OA and SA applies. For those over 55 years old, you can withdraw from these accounts:
- RA funds that are above BRS
- OA funds in your account before your 55th birthday
- Any contributions to your OA account
How Much CPF Funds You Can Withdraw For Multiple Properties To Service Monthly Home Loan Installments
If you have funds left in your CPF account, you can use the money to service the monthly home loan installments. However, you have to ensure the following:
- You will need to meet the BRS requirements if one of the properties is bought through CPF.
- The property you buy should serve you till the age of 95 years.
If you don’t meet the first requirement, you will need a current retirement sum of $181,000 if you don’t have a property that serves you till you are 95 years of age.
For those buying multiple properties, the current BRS of $96,000 in both the CPF SA and OA applies if they are under 55 years of age.
Those over 55 years old can use the following funds as long as they meet the requirements:
- The RA funds you have over the BRS and Full Retirement Sum (FRS)
- OA funds in your accounts before your 55th birthday
- Any contributions from work to the CPF fund
You can use the CPF housing limits calculator to check how much CPF funds you can use for your property.
Alternatively, you can contact a CPF financial advisor before you decide. Remember that if you exhaust your CPF, then you will have to pay in cash.
In the event you sell your property, you will have to pay the money borrowed from your CPF account. You will need to pay the principal amount and any accrued interest.
Accrued interest refers to the interest you would have earned if you did not withdraw from your CPF ordinary account. The interest may range from 2.5-3.5%.
How To Make Changes To Your Monthly CPF Deductions For Home Loan
Adjusting your monthly CPF deductions for your home is quite easy. Just follow these steps:
- Login Into CPF Personal Page
Visit the CPF page and log in. Sign in with Singpass either using the QR code, password, or your mobile phone.
- Go To The Homeownership Page
Upon successful sign-in, you will be redirected to your personal portal. Select the CPF and click on “home ownership”.
Move to the next page where the address of your property will be displayed. Look out for the monthly deduction tab.
- Follow The On-Screen Prompts And Adjust The Deductions
If your property is a HDB flat, you will be redirected to the HDB website. If it’s a private property, follow the on-screen prompts and make the changes.
- Confirm And Submit The Changes
After making the changes, confirm and submit. Make sure you read the terms and conditions. Print the transaction and file it for future reference.
When You Should Make Changes To Your CPF Housing Payments
We have looked at how to adjust your CPF payments for a housing loan. Now we look at scenarios that may require you to make changes to your monthly CPF deductions.
Reduction Of CPF Contributions Once You Hit 35 Years Of Age
Once you get to 35 years old, the amount that goes into your CPF OA is reduced in favour of the SA and MediSave accounts.
In this regard, you may find that your OA savings are not enough to cover your monthly housing loan payments.
At this juncture, it’s best to pay the monthly deductions in cash to avoid any overdue charges.
You Want To Preserve More Of Your CPF Savings For Retirement
On your 55th birthday, the OA and SA are combined to form your retirement account.
It may hence be prudent to preserve the money you have in your OA, especially if you are nearing retirement.
The RA funds are used for the CPF LIFE annuity, which gives you a long-life income after retirement.
CPF accounts have a base interest rate as follows:
- Ordinary Account – 2% per annum
- Special Account – 4% per annum
- MediSave Account – 4% per annum
- Retirement Account – 4% per annum
You can choose to have more money in your SA as this will earn a higher interest rate. In addition to the above, you also earn interest as follows:
- An additional 1% per year for each $60,000 balance held by a member
- An addition of 1% per annum for the combined balance of $30,000 for those over 55 years of age
There Are No Funds Left In Your CPF Ordinary Account
If your CPF account has run completely dry, you will need to pay your housing loan in cash. Instead of waiting for the system to flag you, make the changes in advance.
Legal Representation For CPF And Housing Loans
Before you allocate your money to pay the housing loan, you will need legal representation.
The legal firm you appoint will act on your behalf. It will apply to the CPF on your behalf and request to use the funds for property payment.
Looking for a firm to represent you during the CPF application process is known as conveyancing.
To get the best deal, make sure you compare quotations from various legal firms. This will give you an idea of how much you will need.
If you are purchasing a HDB flat, you can let HDB act on your behalf. Its team of legal professionals can act on your behalf.
Other Ways to Change Your Housing Loan Installments
There are other ways you can adjust your monthly housing loan installments. Here are some of the best ways to do so.
Request For A Loan Tenure Adjustment
You can ask your lender to lengthen the loan tenure. This will lower the monthly loan installments.
Note that although this may lower your monthly installments, it will increase the cost of your housing loan.
Make Partial Lump Sum Payments
By doing so, you will reduce your overall debt. Plus, this will also reduce the cost of the loan. Try to pay a lump sum, and this will reduce the amount you owe and the interest payable.
Refinance Your Home Loan
Consider refinancing your home every few years to renegotiate the interest rate.
Although the changes may not seem significant, this will reduce your overall loan cost.
It’s best to approach your lender – whether it’s HDB or a bank – and discuss the available options.
In doing so, you avoid the risk of defaulting and incurring more charges.
Always Check Your CPF Account Regularly
We have shown you how to adjust CPF payments for your housing loan to pay your monthly housing repayments.
When taking out a home loan, it’s important to consider how your CPF payments will affect your monthly repayments.
By adjusting your CPF contributions, you can ensure that you’re making the most of your money and minimise the amount of interest you pay on your loan.
Talk to your financial advisor about the best way to adjust your CPF contributions to suit your home loan repayments. Make sure you are getting the most out of your money.
If you are looking for a lender to buy a private property, visit Lending Bee. We are a licensed lender that offers high loans at a lower interest rate.
With our convenient loan application portal, you can submit a loan application to own a property in no time. We also offer unique loan packages to suit all income groups.