{"id":19510,"date":"2018-08-30T11:17:06","date_gmt":"2018-08-30T03:17:06","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=19510"},"modified":"2022-07-01T04:59:43","modified_gmt":"2022-06-30T20:59:43","slug":"hdb-loan-cpf-rule-change","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/hdb-loan-cpf-rule-change\/","title":{"rendered":"Taking a HDB Loan: How the CPF rule change affects you"},"content":{"rendered":"
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If you’re intending to buy a HDB flat, be it a BTO or resale unit, then this article is a must-read. On 28 August 2018, the Housing & Development Board (HDB) announced\u00a0a rule change<\/a> regarding the use of CPF monies to purchase your property when taking a HDB loan. Previously, every cent in your CPF Ordinary Account (CPF-OA) would be wiped out to pay down the flat you purchase before HDB would disburse the loan amount for the unit (resulting in a lower loan quantum). With this announcement, flat buyers now have the option to leave up to $20,000 in the CPF-OA when taking a HDB loan.<\/strong> Here\u2019s how it works, and how the rule change affects you:<\/span><\/p>\n

How does the new rule change the buying process?<\/b><\/h3>\n

To repeat, under the old rules, the flat buyer had to drain all available funds in his\/her CPF-OA when taking the HDB loan. Couples making a joint purchase as co-owners will mean that both CPF-OA accounts would be wiped out. There was a good argument for wiping out your hard-earned CPF savings: if you could retain money in your CPF, you would effectively be borrowing more for your house, and at the same time it was also in HDB’s interest to minimise its liabilities as a lender. But now the scenery has changed, you can opt to leave up to $20,000 in your CPF-OA*.<\/span><\/p>\n

*For co-owners such as couples, the maximum amount that can be retained is still $20K across both CPF-OAs, not $40K.<\/p>\n

So here\u2019s how it works:<\/span><\/h3>\n

Say you want to buy a flat that costs $350,000. The down payment \u2013 assuming you have full 90% financing^ \u2013 is a minimum of $35,000.<\/span><\/p>\n

Now let\u2019s say you have $60,000 in your CPF-OA.<\/span><\/p>\n

Under the old rules, you would have to use all of towards paying off the purchased flat before HDB will issue you the loan. That means making a down payment of around 17% instead of the minimum 10&. Borrowers did not have the option<\/span>\u00a0to use less from the CPF-OA.<\/span><\/p>\n

Under the new rules, however, you can choose to use only $40,000 from your CPF. This would leave you with $20,000 in your CPF-OA, and total CPF outlay at the time of completion of sale\/key collection would be around 11% (i.e. your downpayment of 10% + around 1% extra).<\/span><\/i><\/p>\n

^<\/span>The maximum possible financing from an HDB loan is 90% of your flat price or value, whichever is lower. HDB is not obliged to give you the maximum.<\/span><\/i><\/p>\n

\"HDB
Your CPF-OA no longer needs to be wiped out before you can draw a HDB loan.<\/figcaption><\/figure>\n

Why would you want to do that?<\/b><\/h3>\n

The official reason given for the rule change was to provide\u00a0flat buyers with “greater flexibility in using their CPF funds”. But delving deeper, there are three main reasons you would want to consider taking full advantage of this rule change, namely:<\/span><\/p>\n