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So now that we know roughly what the CPF is, and how we might withdraw the money during our retirement years, some of us might wonder if there isn’t a much better use of the money incubating in our CPF accounts between the start of our contributions and the withdrawal date. The answer is yes, there is. As mentioned previously, the CPF functions as a form of social security. Aside from retirement funding, the CPF is also instrumental in delivering the money we need to pay for our housing and medical needs.
The Public Housing Scheme (PHS) in Singapore allows people to use the money in their CPF Ordinary Account to purchase a new or resale Housing Development Board (HDB) flat.
What public housing property may I buy with my CPF?
The money in your CPF Ordinary Account can be used to pay for all or a part of the purchase price of your flat. This includes any instalment payments for loans that you had taken out to buy the flat, as well as miscellaneous house ownership costs such as stamp duty, legal fees or upgrading fees. If you’re eligible to buy a new or resale HDB flat, you will be able to use your CPF to pay for it, on condition that:
- You are not buying a flat with a remaining lease of less than 30 years
- You are not buying a flat with a remaining lease of between 30 and 60 years, while your age added to the remaining lease is less than 80 years.
There are limits set in place to ensure that no one is left without a retirement fund due to overspending on housing. As such, variable limits based on the type of HDB flat you’re buying, and the kind of financing that you’re undertaking to purchase the flat, apply.
When you first purchase your HDB flat, the purchase price of your house is known as the Valuation Limit (VL). If you took a bank loan to pay for your flat, the maximum amount of CPF that can be withdrawn to pay for the flat is 120% of the VL, and is known as the Withdrawal Limit (WL).
If you’re buying a new flat and have got a HDB loan, you may use your CPF until the loan is fully paid.
If you’re buying a resale flat or a DBSS flat and have got a HDB loan, you may withdraw up to the VL. Any further drawdowns on your CPF past the VL, would require you to first set aside the Basic Retirement Sum.
If you’re buying a new flat, resale flat, or DBSS flat, and have got a bank loan, you may withdraw up to the VL. Any further drawdowns on your CPF past the VL, would require you to first set aside the Basic Retirement Sum, and are capped at the WL.
What happens to my CPF if I sell off my flat?
Assuming that you didn’t pay for your HDB flat with a trunk of cash and took a loan like the rest of us poor mortals, note that if you sell off your flat, the sales proceeds must first go towards paying for the outstanding loan first. If you had taken a HDB loan, you would then have to pay the HDB resale levy if applicable, followed by a CPF refund. If you had taken a bank loan, after repaying said loan, you’d have to do a CPF refund and then a HDB resale levy.
Despite being termed a ‘refund’, note that you will not only have to deposit back into your CPF account, the total amount of money that you had withdrawn in order to pay for your flat, but also the amount of interest that that sum of money would have gained from CPF interest rates between the time of withdrawal and the time refunding.
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