{"id":19781,"date":"2023-02-02T15:30:38","date_gmt":"2023-02-02T07:30:38","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=19781"},"modified":"2024-09-18T13:05:40","modified_gmt":"2024-09-18T05:05:40","slug":"cpf-accrued-interest-affect-property-sale-proceeds","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/cpf-accrued-interest-affect-property-sale-proceeds\/","title":{"rendered":"How the CPF accrued interest can affect your property sale proceeds"},"content":{"rendered":"
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Singaporeans are viewed as a practical and savvy bunch, right? When it comes to selling our house<\/a> (whether it is an HDB flat<\/a> or condo<\/a>), most of us prefer to receive the sale proceeds in cash, rather than having it go into our Central Provident Fund (CPF) accounts. In this article, we will show you how much of your property sale proceeds need to be refunded back into your CPF account upon selling your house.<\/p>\r\n\r\n\r\n\r\n

Knowing the amount allows you to better plan your finances and decide whether to sell your house. (Property agent commission<\/a> and the HDB resale levy<\/a> are rather straightforward deductions from your sale proceeds<\/a>, but refunding the CPF monies to your account needs more explanation.)<\/p>\r\n\r\n\r\n\r\n

Do also note that the amount you refund to CPF can finance your next home, so it does not mean that once it is refunded, you cannot reuse your CPF monies.<\/p>\r\n\r\n\r\n\r\n

What you take from your CPF account must be returned to your account after selling the house\u00a0<\/strong><\/h2>\r\n\r\n\r\n\r\n\r\n\r\n

It is compulsory that any CPF funds used to finance a property be repaid to your CPF account when the property is sold.<\/strong> This repayment comprises the principal amount used plus accrued interest<\/em>.<\/p>\r\n\r\n\r\n\r\n

What is ‘accrued interest’?\u00a0<\/strong><\/h3>\r\n\r\n\r\n\r\n

Accrued interest is the interest that the principal amount would have earned if it was sitting in your CPF Ordinary Account (CPF OA) instead of having been taken out to pay for your house. Currently, the CPF OA interest rate is 2.5% per annum.<\/p>\r\n\r\n\r\n\r\n

Accrued interest works just like compound interest. So in this case, the more time passes, the higher the accrued interest you will have to pay back into your CPF OA.*<\/p>\r\n\r\n\r\n\r\n

Yes, most of us did a double-take when first hearing about the accrued interest rules, but hey, the Singapore government really sees the value of CPF for our retirement…<\/p>\r\n\r\n\r\n\r\n

*The reality of having to pay accrued interest on top of the interest you already pay for your mortgage is why some people choose to service their home loan instalments in CASH, even if they can do so using their CPF.<\/em><\/p>\r\n\r\n\r\n\r\n

Besides the principal amount and accrued interest, you must also refund the CPF grants back to your account\u00a0<\/strong><\/h2>\r\n\r\n\r\n\r\n

Although the word “grant” sounds generous, there are strings attached to getting it from the CPF.<\/strong> If you apply for and receive a grant from CPF at any point in time to help pay for your HDB flat, you are required to return that amount, plus accrued interest on that amount, to your CPF account when you sell the house.<\/p>\r\n\r\n\r\n\r\n

We have heard a story of a flat seller who forgot they received a grant from CPF some years back, only to find that the cash proceeds from the sale of their flat got nearly wiped out because they needed to refund to their CPF account the said grant plus accrued interest<\/em>.<\/p>\r\n\r\n\r\n\r\n

(In fact, CPF reported<\/a> that from 2018 to 2020, the number of people who could not fully refund their CPF monies used for housing was decreasing. But the trend may have been reversed in 2021 when the figure dropped to 9%<\/a>.)<\/p>\r\n

Here’s an infographic showing the effects of the CPF accrued interest. \"cpf<\/a><\/p>\r\n\r\n\r\n\r\n\r\n\r\n

If it is any consolation, if the amount you have to refund to your CPF account exceeds your cash proceeds, CPF will write off the excess amount. You will not be required to refund your CPF account<\/a> beyond the sale proceeds you receive. But take note that this is only when you sell your property at market value.<\/em><\/p>\r\n\r\n\r\n\r\n

Here’s the thing: If you sell below market value<\/em> and the amount owed to your CPF account (plus accrued interest) exceeds your cash proceeds, return 100% of the CPF monies used to your account by default<\/em>, even if it means having to pay cash and refund the option money to top up the shortfall<\/a>. That said, sellers can appeal to the CPF Board to waive this ‘debt’, and have their cases assessed on a case-by-case basis.<\/p>\r\n\r\n\r\n\r\n