If you have used your CPF account to pay for your housing loan downpayment, you have less money in that account. And obviously, a debt to CPF.
This article discusses why it is essential to make a voluntary refund to tackle that debt, two alternatives on how to pay back CPF housing loan, and how much you should repay.
Keep reading below to find out what to consider and what to avoid.
Why You Should Make A Voluntary Refund
Before you learn how to pay back CPF housing loan, you should understand why this is a good idea. We will discuss four fundamental reasons in the section below.
1. More Cash In Your CPF Ordinary Account (OA)
The first reason for your CPF housing refund is that this money enters your CPF OA. Therefore, you will have less debt in your account and more money for other needs.
For example, you can use this cash for another property’s downpayment or renovate a new home.
Pro tip: Never assume the amount you have in your CPF OA. Always check your balance before making any financial plans or commitments to avoid miscalculations.
2. Less Stress When Selling
Let’s assume you will want to sell your property later. When you do that, the amount you get from that sale goes towards:
- Your home loan’s unpaid balance
- The CPF refund
Your goal is to minimise the amount going in these directions because you want to have more cash in hand for other things.
For example, you could wish to start a home venture, buy a new property, or go on an exotic holiday.
Warning: Doing a CPF housing refund after the age of 55 is more stressful because these refunds may be blocked.
Here is what happens:
Once you reach the age of 55, part of your CPF OA monies is transferred to your Retirement Account (RA) to ensure you have at least $96,000 in this account. That sum is called the Basic Retirement Sum (BRS).
Besides, the goal is to benefit from the Full Retirement Sum (FRS) or at least $192,000.
Remember: The minimum amounts above ($192,000 for your FRS and $96,000 for your BRS) apply to both spouses.
3. Compound Interest
When you repay CPF used for housing, that money produces an interest of 2.5% per year. That means your money will grow risk-free and faster compared to deposits or savings accounts.
Therefore, you will have significantly more money for your next home purchase.
Here is how much:
Imagine placing $100,000 into your CPF account now. That 2.5% compound interest will increase this original sum to $128,008.45 in 10 years and $144,829.82 in 15 years.
That increase can make a world of difference when you purchase a new property.
4. High Interest Rate
If you are younger than 55 and already have your FRS maxed out:
- You cannot use the Retirement Sum Topping Up (RSTU) Scheme to get more cash into your Special Account (SA).
- Your voluntary contributions have a maximum threshold of $37,740 per year.
Conversely, people over 55 should use their RSTUs to get more money towards their Enhanced Retirement Sum (ERS), thanks to two essential advantages:
- 4% annual interest rate
- Tax benefits
Here is the solution:
You can use the CPF refunding opportunity to top up your SA.
But remember that, as discussed in the previous section, your voluntary CPF refunds initially go towards the RA FRS until you reach the cap if you are 55 and older.
What if you are just now turning 55?
In this case, you can turn your cash savings into SA funds only if you hit the FRS. The benefit of doing that is being able to withdraw the cash whenever you need it.
Here is how to do that:
- Use a Special Account Shielding Hack to funnel your CPF housing funds towards your FRS RA.
- Enjoy the remaining balance in your SA.
How Much Voluntary Housing Refund To Make
Now that you know why a CPF voluntary housing refund is a good idea, let’s see how much voluntary housing refund you should make.
First, know how much you owe.
If you have taken part of your CPF OA monies for a property downpayment, that withdrawn sum is another loan. Basically, you owe the CPF the sum you took out, plus any accrued interest.
Warning: If you have used a significant part of your CPF OA as a downpayment, seeing the accumulated debt in that account can shock you.
To check how much your debt is, follow these steps:
- Log into your CPF.
- Click the Home Ownership Dashboard.
- Check the total principal amount drawn.
- Check the total accrued interest.
If you want to know how to pay back CPF accrued interest, consider these two variables:
- You do not need to repay this interest before selling your property, but:
- The interest will increase yearly at a 2.5% rate until you refund the money.
Even if you have received an HDB housing grant, remember that:
- This grant is now in your CPF OA, mingled with your other OA monies, and:
- You will have to give that money back, along with any accumulated interest.
Remember: Repaying your CPF OA debt is not the same as repaying your home loan and vice versa.
So the question still stands: how much should you refund?
The answer is – as much as you can reasonably. There is no minimum limit – the maximum limit is the amount you owe plus accrued interest. However:
- If you pay too little, the compound interest might not be attractive enough. Also, your funds will go to your RA if you’re over 55.
- If you pay too much, you might not have enough cash at hand for stamp duty or downpayment when buying a new property.
How To Make A Voluntary Refund
In this section, you will learn how to pay back CPF housing loan using two methods.
The CPF Website Method
To refund your CPF housing loan online:
- Open the CPF voluntary housing refund online form.
- Read and accept the disclaimer, then click start.
- You will be prompted to use your Singpass to log in. Do so following the instructions.
- Choose a payment method.
- Choose your property.
- Enter the refund sum you are willing to pay.
- Make sure you agree to the declaration before hitting the confirmation button.
- Finish the payment.
2. The CPF Mobile App Method
Here’s how to refund the CPF housing loan using the mobile app:
- Log into this app using your Singpass details.
- Click on “services”.
- Go to “Voluntary Housing Refund”.
- Choose “Continue”.
- Choose the desired property.
- Write the amount you want to refund.
- Choose “Next” to see the agreement.
- Tap “Yes” to continue.
- Choose the payment method.
- Finalise the process.
Warning: If you use eNETS, the payment doesn’t appear immediately in your transaction history. This only happens with PayNow’s QR code or OCBC’s PayAnyone.
Pro tip: If you cannot manage using the methods above, contact CPF here so they can guide you on how to pay back CPF housing loan.
How Much Voluntary Refund Can You Make?
This article taught you how to repay your CPF housing loan, how much voluntary refund to make, and the step-by-step process.
The essential part is refunding the right amount within your means.
If you give back too little, the added interest will not help you much. If you give back too much, you might remain cashless when you need it the most.
Lending Bee can help with both scenarios.
Our years of experience in the loan market has taught us to craft personalised financial packages that suit everyone. Unsure of what you need or how we can help?
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.