Buying a home is a topic close to all our hearts in Singapore. In fact, many of you may already know that Singapore has one of the highest home-ownership rates in the world – 90% of residents here own their own homes.
Another thing we all know about buying a property in Singapore is that it can be very expensive. This is why the majority of us use our CPF Ordinary Account (CPF-OA) balances to pay the down payment and monthly instalments on our homes.
Read Also: Why Singaporeans Should Stop Using Their CPF Money To Pay Their HDB Home Mortgage
While this decision is sound when we purchase our homes, we may not know its implications years down the road. This is because of the Accrued Interest we build up, the Property Charge we are liable for, and the fact that we can make a Property Pledge to reduce our retirement sum.
If you have no idea what these three property-related terms mean, then continue reading below as we explain them.
Accrued Interest
This should not be confused with the interest we pay the bank on our HDB or bank loan. Instead, Accrued Interest is the interest we must repay to our CPF Accounts because we used them to fund our home purchase.
Accrued Interest accumulates when we use our CPF funds for the following reasons:
- to pay for the down payment on our HDB BTO, resale flat or private residential property;
- to pay for the monthly instalments on our HDB or bank loan; and/or
- Take Housing grants to buy our HDB BTO or resale flat
This might sound strange to many, as we have to pay interest to use our own CPF funds. The thing we have to remember is that our CPF funds are primarily meant for our retirement. When we use it to buy our home, we are essentially “borrowing” from our retirement nest egg. Hence, we have to pay it back when we sell the property.
This interest return is the Accrued Interest, and is the interest that we would have earned if we didn’t use our CPF Ordinary Account funds to pay for our home. It is typically compounded at 2.5% per annum because we use our CPF Ordinary Account balances. This figure can rise to 3.5% per annum if we do not have sufficient CPF balances to earn the extra 1% interest CPF pays on our first $60,000 in balances.
Further, if we receive more than $30,000 of housing grants, part of it may be for contributions to our Special Account and Medisave Account when we sell the property, which means the accrued interest is compounded at 4.0% per annum, or higher.
Lastly, we should note that although we must refund this amount to our CPF accounts, we can still use the majority of the funds to purchase our next home.
Property Charge
Our Property Charge is the total amount we owe to our CPF accounts, including accrued interest (discussed above) and the principal we may have used for the down payment, monthly instalments, and housing grants.
When we sell our property, this is the entire amount we need to refund to our CPF account. As discussed above regarding accrued interest, we can continue to use this amount for our next home purchase.
Things become slightly different once you turn 55. At that point, CPF creates a Retirement Account (RA) for you.
If you sell your property after age 55, CPF housing refunds may first be used to help you set aside your applicable retirement sum before any remaining amount is credited to your Ordinary Account.
For members turning 55 in 2026, the Basic Retirement Sum (BRS) is $110,200, and the Full Retirement Sum (FRS) is $220,400. Members who wish to receive higher CPF LIFE payouts can choose to set aside up to the Enhanced Retirement Sum (ERS), which is $440,800 in 2026.
If you have sufficient CPF savings used for your property (including accrued interest), CPF may allow you to withdraw savings above the BRS even if you have not set aside the FRS in cash. This is because the CPF savings tied to your property effectively support your retirement sum requirement when the property is eventually sold.
Read Also: [Beginners’ Guide] Understanding CPF LIFE And Your Monthly Payouts When You Retire In Singapore
Property Pledge
A property pledge allows eligible CPF members to withdraw more of their CPF savings at age 55 by committing to use the value of their property to support their retirement needs.
By making a property pledge, you are not giving up ownership of your home, nor are you taking on a loan. Instead, you are providing CPF with an undertaking that part of the proceeds from your property will be used to restore your retirement savings when the property is sold.
This option is typically relevant for members who wish to withdraw CPF savings above the Basic Retirement Sum while relying on their property to help meet the Full Retirement Sum requirement. When the property is eventually sold, the CPF savings used for the property, accrued interest, and any pledged amount will need to be refunded in accordance with CPF rules.
Read Also: Here’s What Your CPF Full Retirement Sum Might Look Like When You’re 55
Again, if we wish to be on the Basic Retirement Sum or Enhanced Retirement Sum, the property pledge will not matter.
Our CPF Is Meant For Our Retirement
One useful way to think about CPF is that it is designed primarily to safeguard our retirement adequacy.
While CPF members can use their Ordinary Account savings for housing, the system is structured so that the money used for property is eventually restored to their retirement savings. This is why CPF requires both the principal amount withdrawn and the accrued interest to be refunded when a property is sold. The objective is not to penalise homeowners, but to ensure their retirement savings are not permanently reduced by housing expenses.
Rather than viewing CPF as a restriction, it may be more helpful to see it as a framework that balances today’s housing needs with tomorrow’s retirement needs. Members who wish to build a larger retirement nest egg can also make voluntary top-ups through the Retirement Sum Topping-Up (RSTU) Scheme and enjoy the compounding effect of CPF’s risk-free interest rates over the long term.
This article was written in 2019 and we have updated it with the latest information.
