The Definitive Guide To Updates To CPF Usage And HDB Housing Loan
 
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The Definitive Guide To Updates To CPF Usage And HDB Housing Loan

Kenneth Fong
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Planning to purchase a resale flat with your CPF?

Effective today, the rules on CPF usage and HDB housing loans will be updated with a focus on ensuring that a flat’s remaining lease can cover the youngest buyer until the age of 95.

To, you know, ensure that people like you and I don’t outlive our property lease and end up homeless.

Seedly People With HDB Properties That Cover Till 95

On the flip side, it seems like it will be harder to sell off properties with shorter leases remaining. And it’s debatable if this will be an effective way to prevent Singaporeans from buying houses with shorter leases.

Also, I’m pretty sure that the kopitiam and taxi uncles are already complaining that this will somehow affect their CPF withdrawal at 55… #justsaying


TL;DR: Updates To CPF Usage And HDB Loan

I know. I know.

CPF and HDB-related stuff can be dry AF.

Squidward Deflating
Source: SpongeBob SquarePants | giphy

So I’m going to keep it as succinct as possible:

  1. CPF usage and HDB loans will be pro-rated based on whether the property’s remaining lease can cover the youngest buyer till age 95
  2. Buyers who purchase a home for life will face lesser restrictions on their CPF usage
  3. The change safeguards individuals by taking care of their retirement adequacy (allowance and roof above their head)

Use Of CPF For Property Purchase

Home To Sell

Current Rules

The amount of CPF you can use depends on the remaining lease of the property:

Remaining Lease Of PropertyUse Of CPF
More Than 60 YearsMaximum allowed

Up to Valuation Limit (VL)
Between 30 Years And Less Than 60 YearsAllowed only if remaining lease covers youngest buyer until at least the age of 80

Capped at pro-rated VL

No CPF can be used if the property’s remaining less is less than 30 years.

New Rules

With the new changes, the amount of CPF that can be used depends on whether the remaining lease can cover the youngest buyer until age 95:

Remaining Lease Of Property At Least 20 Years & Can Cover Youngest Buyer Till Age Of 95Use Of CPF
YesMaximum allowed

Up to VL
NoMaximum allowed will be pro-rated based on extent the remaining lease of property can cover the youngest buyer until age 95

This change will help buyers set aside CPF savings for their housing needs during retirement (e.g. a replacement property).

With the update, NO CPF can be used if the property’s remaining lease is less than 20 years.

Does This Affect Me?

The updated rules will apply to:

  • HDB flat applications received on or after May 10, 2019
  • Private properties and executive condominium units with Option to Purchase or Sales & Purchase Agreement signed on or after May 10, 2019
  • CPF withdrawal applications received on or after May 10, 2019

Updates To HDB Housing Loan Rules

house

If you wish to take an HDB housing loan, you can take the full 90 per cent Loan-to-Value (LTV) if the remaining lease can cover the youngest buyer to the age of 95.

Note: This is even if the flat has less than 60 years left on its lease.

If the remaining lease cannot cover the youngest buyer to the age of 95, then you will be offered an HDB loan on a pro-rated basis.

Property Covers Youngest Buyer TillUse Of CPF Subject ToHDB Housing Loan Subject To
95 Years And AboveValuation Limit (VL)

Remaining lease of property > 20 years
Loan-To-Value (LTV) limit of 90%

Loan tenure is (whichever is shortest):
  • 25 years

  • 65 years minus average age of buyers

  • Remaining lease at point of purchase - 20 years
  • Below 95 YearsVL pro-rated to extent that remaining lease can cover youngest buyer to age 95

    Remaining lease of property > 20 years
    LTV limit of 90% is pro-rated to extent that remaining lease can cover youngest buyer to age 95

    Loan tenure is (whichever is shortest):
  • 25 years

  • 65 years minus average age of buyers

  • Remaining lease at point of purchase - 20 years
  • Does This Affect Me?

    If you bought your property before 10 May 2019 and are still servicing existing housing loans, then no.

    If you’re in the middle of a property purchase, you should approach CPF Board or HDB for clarifications and assistance.


    CPF Withdrawal Rules After Age 55 With A Property

    Old Man

    Current Rules

    When you hit the age of 55, you can withdraw your CPF savings above the Basic Retirement Sum (BRS) if you own a property with a remaining lease of at least 30 years.

    This ensures that you have secured:

    • A home in retirement
    • A basic level of retirement income

    New Rules

    When you hit 55, you can withdraw your CPF savings above the BRS if you own a property with sufficient remaining lease to cover you till the age of 95.

    This ensures that you have secured:

    • A home for life
    • A basic level of retirement income

    Does This Affect Me?

    This change is not expected to affect most CPF members. According to the Ministry of National Development (MND), about 98 per cent of HDB households and 99 per cent of private property owners have a home which can last them to 95 years and older.

    Members who bought their property and turned 55 years old before May 10 can continue to apply to the CPF Board to withdraw their CPF savings above their BRS, under the previous rules.


    Some Scenarios After The Updates

    To make it even easier to understand, let’s look at some plausible life scenarios:

    1. My Partner And I Are Both 25 Years Old, We Just Got Married, And Are Buying Our First Home

    Property Type: 4-room resale HDB flat with 65 years lease left (read: does not cover them until age 95)

    Market Value Of Property: $430,000

    Max CPF Usage Based On VL: 90% or $387,000 (down from previous 100% or $430,000)

    Max HDB Loan LTV: 81% or $348,300 (down from previous 90% or $387,000)

    Cash They Need To Cough Up: $81,700 (up from previous 10% or $43,000)

    Retirement: As the property does not cover them till age 95, they cannot apply to withdraw their CPF savings above BRS, except for the first $5,000 from age 55 and 20% of their Retirement Account savings from their payout eligibility age.

    2. My Partner And I Are Both 45 Years Old, And Are Buying A Flat To Be Closer To Our Elderly Parents’ Homes

    Property Type: 4-room resale HDB flat with 50 years lease left (read: covers them until age 95)

    Market Value Of Property: $430,000

    Max CPF Usage Based On VL: 100% or $430,000 (up from previous 80% or $344,000)

    Max HDB Loan LTV: 90% or $387,000 (same as previous)

    Cash They Need To Cough Up: $43,000 (down from previous 20% or $86,000)

    Retirement: As the property covers them till age 95, they may apply to withdraw their CPF savings above BRS from age 55.

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    About Kenneth Fong
    Editor of Seedly's blog. Owner of a 4-room HDB BTO and married to a financial clutz. Probably the closest to an adult you can find on the Seedly team.
    You can contribute your thoughts like Kenneth Fong here.

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