Over the years, CPF has continued to revise its rules to allow Singaporeans to fulfil their aspirations to own private property by tapping on their CPF monies.
Here’s what you need to know when you plan to tap on your CPF to finance your private property purchase, whether for staying or investment purposes.
Eligibility For CPF Private Properties Scheme
The CPF Private Properties Scheme (PPS) sets out conditions under which Singaporeans can use their CPF monies for buying of private properties.
To be eligible for PPS, you must be buying a property in Singapore with remaining lease of at least 30 years. Buying overseas property using your CPF is not allowed.
In addition, if you are buying a private property with a remaining lease of less than 60 years, your current age plus your remaining lease must be at least 80 years.
Undischarged bankrupts are also ineligible for PPS. You can read the terms and conditions of PPS in detail for more information.
Ways Your CPF Be Used To Finance Your Private Property Purchase
You can use your CPF to fund your private property purchase in four main ways:
#1 Paying for the purchase of the private property.
#2 Servicing monthly repayments of your private property mortgage.
#3 Repaying of monthly loan instalments for land purchase and/or construction costs of your residential property.
#4 Paying of stamp duty, legal costs, survey fees, and other costs relating to the purchase and/or construction of your residential property.
How Much CPF Can You Use To Buy Private Properties?
Usage of CPF monies under PPS is subject to the Valuation Limit and Withdrawal limit. Here are the definitions of each of these limits.
Valuation Limit (VL): The valuation of your property at the point of purchase or the price you paid for the property, whichever is lower.
Withdrawal Limit (WL): 120% of the Valuation Limit
When the total CPF withdrawn by all the owners reaches the Valuation Limit, every owner must individually set aside the half of the prevailing Basic Retirement Sum (BRS) in their OA and SA (for those below the age of 55) or their OA, SA, RA (for those 55 and above) if they want to withdraw more CPF to service the outstanding housing loan.
Once homeowners’ usage of their CPF on this property hits the Withdrawal Limit, no further usage of CPF to service this home loan is allowed. If you are not aware of these rules and planned ahead, you may find yourself years down the road not being able to continue to service your mortgage payments using your CPF and have to cough up cash instead.
Read Also: How Much CPF Can You Use For Your Home?
Thus, prospective property buyers should take these limits into consideration when planning your home loan financing. Either buy within your means (from a cashflow perspective) or you need to have a plan to manage your repayments once you cannot use any more CPF monies. You can use this CPF Housing Withdrawal Limits Calculator that can help you estimate when you will reach the VL or WL.
In addition, those who are buying a private property with a remaining lease of less than 60 years, the maximum OA savings you can use is capped at a percentage of the property purchase price, or value of the property, whichever is lower. You can use this CPF lease calculator to find out exactly how much CPF you can use in such situations.
You may use your CPF to buy more than one private property, subject to the Multiple Property Rule, which enforces the prevailing Valuation Limit and lease-age conditions across multiple property purchases and co-owners.
How To Use CPF To Pay For Your Private Property Purchase
Step 1: You first need to authorise your lawyer to submit the application form to use your CPF savings to buy the private property and a valuation report prepared by a licensed valuer.
Step 2: Upon approval, you will receive your Letter of Approval.
Step 3: Your lawyer will then need to work with CPF Board’s lawyer to complete the required legal documentation.
Step 4: You need to pay the cash downpayment of at least 5% of the Valuation Limit and any balance purchase price after taking into consideration the lump sum CPF and the housing loan amount.
Step 5: Upon fulfilling the prior steps, your CPF savings will be released.
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