{"id":40365,"date":"2022-07-21T16:25:00","date_gmt":"2022-07-21T08:25:00","guid":{"rendered":"https:\/\/www.99.co\/singapore\/insider\/?p=40365"},"modified":"2022-07-21T12:25:50","modified_gmt":"2022-07-21T04:25:50","slug":"housing-loan-cpf-basic-retirement-sum","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/housing-loan-cpf-basic-retirement-sum\/","title":{"rendered":"What happens if your housing loan deductions reach your CPF Basic Retirement Sum (BRS)?"},"content":{"rendered":"
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When buying a house, some of us would use our CPF savings to pay for our housing loans. But the thing about CPF is that it\u2019s for retirement, so there\u2019s a limit to how much you can use it for housing. Since the limit depends on the Basic Retirement Sum<\/strong>, what happens if your housing loan deductions reach it?\u00a0<\/span><\/p>\n\n\n\n

Before we explain further, let\u2019s first talk about what and how much you can use your CPF Ordinary Account (OA) savings for housing.\u00a0<\/span><\/p>\n\n\n\n

For housing, what can your CPF OA savings be used for? <\/b><\/h2>\n\n\n\n

Most people use their CPF OA savings for their property downpayment. Some use it to pay off their housing loan as well, whether it\u2019s HDB loan or bank loan<\/a>.\u00a0<\/span><\/p>\n\n\n\n

But the usage of CPF OA savings is not limited to those. It can also be used to pay your stamp duties and legal fees. And if you\u2019re paying the home loan for your HDB flat with CPF, you\u2019ll need to be insured under the Home Protection Scheme<\/a> (HPS), which will be paid using CPF.\u00a0<\/span><\/p>\n\n\n\n

For private properties, you can also use the CPF OA savings to pay for the loan for house construction or the purchase of vacant land. <\/span><\/p>\n\n\n\n

At the same time, there\u2019s a limit to how much you can use your CPF for housing. Generally, it depends on the type of your home loan and property. <\/span><\/p>\n\n\n\n

Read this: CPF Housing Withdrawal Limits: What you need to know<\/a><\/i><\/p>\n\n\n\n

What\u2019s the limit for using CPF OA savings for housing? <\/b><\/h2>\n\n\n\n

Ultimately, CPF savings is meant for your retirement so there are some limits to adhere to. This ensures you don\u2019t spend too much of it on your housing loan at the expense of your retirement funds.\u00a0<\/span><\/p>\n\n\n\n

One of the major rules is that you can\u2019t use your CPF if the property has less than 20 years of lease<\/strong> remaining.\u00a0<\/span><\/p>\n\n\n\n

For most people, the property bought has a remaining lease covering the youngest owner until age 95. As of 10 May 2019, <\/span>the limit on the use of CPF savings depends on the type of property and housing loan<\/span><\/a>. <\/span><\/p>\n\n\n\n

If you\u2019re buying a new HDB flat with an HDB loan<\/b><\/h3>\n\n\n\n

Other than the <\/span>Loan-to-Value (LTV)<\/span><\/a> limit, there\u2019s no limit to how much you can use your CPF savings if you\u2019re buying a BTO with an HDB loan. So you can use all your OA savings to pay off the loan. <\/span><\/p>\n\n\n\n

If you\u2019re buying a resale flat with an HDB loan<\/b><\/h3>\n\n\n\n

The limit is the lower of the valuation or the property price at the time of purchase. This is also known as the valuation limit. If you want to use more than this limit, you\u2019ll need to set aside the <\/span>Basic Retirement Sum (BRS)<\/span><\/a> in your CPF accounts first. <\/span><\/p>\n\n\n\n

Let\u2019s say the purchase price of the property is S$320,000 and its valuation is S$300,000. If you want to use more than the S$300,000 limit to pay off your remaining loan, you\u2019ll need to set aside the BRS first. <\/span><\/p>\n\n\n\n

If you\u2019re buying a new HDB flat, resale flat or private property with a bank loan<\/b><\/h3>\n\n\n\n

Similar to resale flats bought with HDB loan, the limit is the lower<\/strong> of the valuation or property price at the time of purchase if you don\u2019t set aside the BRS in your CPF.\u00a0<\/span><\/p>\n\n\n\n

But if you set aside the BRS in your CPF, you can use up to 20% of either the valuation or property price (whichever is lower) from your OA savings to pay off your loan. This essentially means that you can use up to the withdrawal limit, which is 120% of the valuation limit. <\/span><\/p>\n\n\n\n

Using the same figures to illustrate, you\u2019ll be able to use up to S$300,000 + additional S$60,000 = S$360,000 if you set aside BRS in your CPF account. <\/span><\/p>\n\n\n\n

For properties with a remaining lease that doesn\u2019t cover the youngest owner till age 95, the limit to how much you can use your OA savings will be prorated based on the youngest owner\u2019s age. <\/span><\/p>\n\n\n

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\"Infographic<\/a>
Infographic on the limit when using CPF to pay your housing loan. Source: CPF<\/figcaption><\/figure><\/div>\n\n\n

If you\u2019re buying another property<\/b><\/h3>\n\n\n\n

Already bought at least one property with your CPF savings? If you\u2019re buying a new property that can cover you till you\u2019re 95, you\u2019ll need to set aside the BRS in your CPF account. <\/span><\/p>\n\n\n\n

Otherwise, you\u2019ll have to set aside the Full Retirement Sum (FRS) before buying another property. <\/span><\/p>\n\n\n\n

Now that you know about the limit, you might be wondering what these retirement sums are all about. <\/span><\/p>\n\n\n\n

What are all these Retirement Sums? <\/b><\/h2>\n\n\n\n

They basically refer to the amount of CPF savings that will be set aside for retirement. When you turn 55, a Retirement Account (RA) will be formed. Savings from your Special Account and OA will be transferred to this RA to meet the Retirement Sum. <\/span><\/p>\n\n\n\n

The retirement sum depends on your age. It will be higher for those who turn 55 in the later years due to inflation and the higher cost of living in future.\u00a0<\/span><\/p>\n\n\n\n

Here are the retirement sums for those turning 55, up to the year 2022. If you\u2019re below 55, you can refer to the current BRS. <\/span><\/p>\n\n\n\n

55th birthday in the year of\u00a0<\/strong><\/b><\/td>Basic Retirement Sum\u200b<\/strong><\/b><\/td>Full Retirement Sum\u200b<\/strong><\/b><\/td>Enhanced Retirement Sum\u200b<\/strong><\/b><\/td><\/tr>
2017<\/span><\/td>S$83,000\u200b<\/span><\/td>S$166,000\u200b<\/span><\/td>\u200bS$249,000<\/span><\/td><\/tr>
2018<\/span><\/td>S$85,500<\/span><\/td>S$171,000\u200b<\/span><\/td>S$256,500\u200b<\/span><\/td><\/tr>
2019<\/span><\/td>S$88,000<\/span><\/td>S$176,000\u200b<\/span><\/td>S$264,000\u200b<\/span><\/td><\/tr>
2020<\/span><\/td>S$90,500<\/span><\/td>S$181,000\u200b<\/span><\/td>S$271,500\u200b<\/span><\/td><\/tr>
2021<\/span><\/td>S$93,000<\/span><\/td>S$186,000\u200b<\/span><\/td>S$279,000\u200b<\/span><\/td><\/tr>
2022<\/span><\/td>S$96,000<\/span><\/td>S$192,000<\/span><\/td>S$288,000<\/span><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

After the savings are transferred to meet the Retirement Sum, you can use the remaining balance to pay for your housing loan. <\/span><\/p>\n\n\n\n

So even as you continue to work after 55, you can still use the monthly contributions that go into your OA to service your mortgage. This applies even if you don\u2019t meet the Retirement Sum. <\/span><\/p>\n\n\n

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\"Elderly<\/a>
Using your CPF to pay your housing loan lowers the amount set aside for retirement.<\/figcaption><\/figure><\/div>\n\n\n

But what if your housing loan deductions reach the Basic Retirement Sum?<\/b><\/h2>\n\n\n\n

If you plan to use more than the valuation limit to pay your housing loan with CPF, you can top up your CPF to continue paying your mortgage with it. However, do note the 120% withdrawal limit if you\u2019re taking a bank loan. <\/span><\/p>\n\n\n\n

Planning to continue using your OA to pay for your housing loan after you turn 55? You can apply to <\/span>reserve your OA savings<\/span><\/a> before they\u2019re transferred to your RA. <\/span><\/p>\n\n\n\n

You can either reserve all or part of your OA savings via <\/span>MyCPF<\/span><\/i> Online Services<\/span><\/a> at least three weeks<\/strong> before your 55th birthday.\u00a0<\/span><\/p>\n\n\n\n

But even if you\u2019ve submitted the request to reserve your OA savings, the CPF Board can still transfer it if any of the following happens: <\/span><\/p>\n\n\n\n