CPF 
Use of CPF in Property Transactions - The Basics

The Central Provident Fund (CPF) is a key component of Singapore’s social security system, designed to help residents save for retirement, healthcare, and housing needs. One of the significant uses of CPF savings is in property transactions, where it plays a crucial role in helping Singaporeans finance their home purchases. This article explores how CPF can be used in property transactions, the eligibility criteria, the procedures involved, and the considerations to keep in mind.

Understanding CPF and Its Purpose

CPF is a compulsory savings scheme that requires contributions from both employees and employers. These contributions are allocated into three accounts:

  • Ordinary Account (OA): Primarily for housing, insurance, investment, and education.
  • Special Account (SA): For retirement and investment in retirement-related financial products.
  • Medisave Account (MA): For medical expenses and approved medical insurance.

For property transactions, the Ordinary Account (OA) is the primary source of funds.

Eligibility Criteria for Using CPF in Property Transactions

To use CPF savings for property transactions, you must meet the following criteria:

  1. Age: You must be at least 21 years old. Those below 21 can only use CPF savings if purchasing with their parents or legal guardians.
  2. Property Type: CPF can be used for HDB flats, Executive Condominiums, and private properties.
  3. Loan Approval: You must secure a loan from HDB, a bank, or a financial institution.
  4. Valuation: The property must be valued by a professional valuer approved by HDB or the bank.

Uses of CPF in Property Transactions

CPF savings can be utilized in various aspects of property transactions, including:

  1. Down Payment:
    • For HDB flats, you can use your CPF OA savings to pay for the full down payment.
    • For private properties, CPF can be used for up to 20% of the property’s value (for new properties) and 55% of the remaining amount (for resale properties).
  2. Monthly Mortgage Payments:
    • CPF savings can be used to service monthly mortgage payments, reducing the cash outflow needed for loan repayments.
  3. Stamp Duty and Legal Fees:
    • CPF OA savings can also cover the stamp duty and legal fees associated with the property purchase.
  4. Home Protection Scheme (HPS):
    • For HDB flat owners, CPF can be used to pay for the HPS, an insurance scheme that protects members and their families against losing their homes in the event of death or permanent incapacity.

Procedures for Using CPF in Property Transactions

The process of using CPF savings in property transactions involves several steps:

  1. Apply for a Property: Decide on the type of property you wish to purchase and apply for it through HDB or a real estate agent.
  2. Obtain a Loan: Secure a loan from HDB, a bank, or a financial institution.
  3. Valuation and Approval: Ensure the property is valued by a professional valuer, and seek approval from CPF Board to use your OA savings.
  4. Submit CPF Withdrawal Application: Complete and submit the necessary CPF withdrawal application forms.
  5. Funds Disbursement: Once approved, the CPF Board will disburse the funds to the relevant parties, such as the seller or the financial institution handling your loan.

Considerations and Limitations

While using CPF for property transactions offers significant benefits, there are important considerations to keep in mind:

  1. Accrued Interest: The amount withdrawn from your CPF OA for property purchase must be repaid with accrued interest when you sell the property.
  2. Minimum Sum Scheme: Ensure you have enough savings in your CPF OA to meet the Minimum Sum Scheme requirements for retirement.
  3. Property Ownership Period: CPF usage is subject to rules such as the Minimum Occupation Period (MOP) for HDB flats.
  4. Valuation Limit and Withdrawal Limit: CPF withdrawals are subject to limits based on the property’s valuation and the remaining loan amount.

Conclusion

The use of CPF in property transactions provides a valuable avenue for Singaporeans to finance their home purchases, making homeownership more accessible. Understanding the eligibility criteria, procedures, and considerations is essential to making informed decisions and effectively utilizing CPF savings. By leveraging CPF for property transactions, Singaporeans can achieve their homeownership dreams while ensuring their retirement savings remain secure.

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