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How Much CPF Can Be Used for Downpayment?


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CPF and Downpayment


Introduction

In the previous articles, we discussed on the possible uses of CPF in relation to your property (click here for the article), and how much CPF can be used for your property (click here for the article). This article will discuss on the CPF required for downpayment as it is also an important topic for most people when they make the downpayment.

The CPF is a bridge between the cash component and your loan when it comes to financing your property. When you have a shortfall in cash and/or loan, CPF can be used to pay for a portion of the purchase price.


Taking a HDB Loan

The downpayment for buyers that are taking HDB loan is 10% of the purchase price. The downpayment will be paid during the appointment when the Agreement for Lease (AFL) is signed. It can be paid in cash or from the CPF OA. Therefore, it also means that the highest loan ceiling is 90% of the purchase price.

When buyers take up a HDB loan, their CPF OA account will be used first and each owner can keep up to $20,000 in their CPF OA. Any shortfall after including the HDB loan and the CPF will also need to be topped up in cash.

However, if after the monies used from the CPF OA is more than 10% of the valuation price even after setting aside $20,000 for each owner, then CPF will cover more than 10% of the valuation price. The remaining can be loaned from HDB (less the booking fee that is already paid).

Buyers can choose to use cash even if they have more than 10% of the valuation price in their CPF account. However, the CPF OA will still be emptied (or keep up to $20,000 for each owner). The cash can only be used to relieve the HDB loan and not the CPF component.

In any case when the loan is reduced to less than 90% of the purchase price (used more cash or more than 10% of purchase price is paid by CPF), the downpayment will still be 10% of the purchase price. The balance will be paid at the appointment when keys are collected (can be paid by cash or CPF), together with the disbursement of HDB loan. For example, a buyer has CPF that covers 12% of the purchase price (assuming he empties it for easy calculation), and wants to pay cash that is 3% of the purchase price, the loan will be reduced to 85% (assuming he originally was able to get 90% loan). He will still pay 10% downpayment with cash or CPF (5% will still be with the buyer). When collecting keys, loan will be disbursed for 85% of the purchase price. Adding to the downpayment, 95% of the purchase price is already covered. The 5% which is still with the buyer, will also be paid here (by CPF or cash).

As of 28 August 2018, HDB flat buyers can now set aside $20,000 each in their CPF OA when taking up a HDB loan.


Taking a Bank Loan

The downpayment for buyers that are taking bank loan is 20% of the purchase price. A minimum of 5% of the purchase price have to be paid in cash in the downpayment. The remaining 15% for the downpayment can be paid by cash or CPF. The downpayment will be paid during the appointment when the Agreement for Lease (AFL) is signed. Since the maximum loan ceiling is only 75%, there will still be a balance of 5% to be paid during the appointment to collect the keys. It can be paid by CPF or cash.

For a loan ceiling of 55% (loan tenure exceed 25 years or loan tenure will go beyond 65 years of age of buyer), the downpayment is still 20% of the purchase price. A minimum of 10% of the purchase price have to be paid in cash in the downpayment. The remaining 10% for the downpayment can be paid by cash or CPF. The downpayment will be paid during the appointment when the Agreement for Lease (AFL) is signed. Since the loan ceiling is only 55%, there will still be a balance of 25% to be paid during the appointment to collect the keys. It can be paid by CPF or cash.

The option/booking fee paid earlier when booking a flat can be used to offset any cash that will be used in downpayment.

Buyers may choose how much CPF savings to use, or not to use at all. However, there is a minimum 5% (or 10%) cash payment of the purchase price, and the maximum loan ceiling is only 75%. The remaining is paid from CPF savings or cash.


Conditions

There are certain conditions when we use our CPF savings. It is explained in a separate article as it is quite a big topic on its own. If you want to know more about it, please click here.


Conclusion

CPF can be very useful in bridging the gap between the limited cash that most people have and the loan limit. However, do take note of its drawbacks and conditions that are bounded to its usage.


cpf downpayment table

CPF Downpayment for New HDB Flats



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CPF and Downpayment


Introduction

In the previous articles, we discussed on the possible uses of CPF in relation to your property (click here for the article), and how much CPF can be used for your property (click here for the article). This article will discuss on the CPF required for downpayment as it is also an important topic for most people when they make the downpayment.

The CPF is a bridge between the cash component and your loan when it comes to financing your property. When you have a shortfall in cash and/or loan, CPF can be used to pay for a portion of the purchase price.


Taking a HDB Loan

The downpayment for buyers that are taking HDB loan is 10% of the purchase price. The downpayment will be paid during the appointment when the Agreement for Lease (AFL) is signed. It can be paid in cash or from the CPF OA. Therefore, it also means that the highest loan ceiling is 90% of the purchase price.

When buyers take up a HDB loan, their CPF OA account will be used first and each owner can keep up to $20,000 in their CPF OA. Any shortfall after including the HDB loan and the CPF will also need to be topped up in cash. For example, a buyer only has 8% of the purchase price in the CPF account available for the flat and a 90% loan to the house. This adds up to only 98% of valuation price. The buyer will need to top up the remaining 2% of the purchase price in cash (option/booking fee can be used to offset any cash component, if there are any balance, the booking/option fee will be refunded in cash).

However, if after the monies used from the CPF OA is more than 10% of the valuation price even after setting aside $20,000 for each owner, then CPF will cover more than 10% of the valuation price. The remaining can be loaned from HDB, less booking/option fee. For example, the buyer has 18% (assuming he chooses to empty his CPF OA for easy calculation) of the valuation price in the CPF account available for the HDB flat. He will only be allowed to loan a maximum of 82%, and not 90% of the valuation price from HDB (assuming he passed other tests like Mortgage Servicing Ratio etc).

Buyers can choose to use cash even if they have more than 10% of the valuation price in their CPF account. However, the CPF OA will still be emptied (or keep up to $20,000 for each owner). The cash can only be used to relieve the HDB loan and not the CPF component.

In any case when the loan is reduced to less than 90% of the purchase price (used more cash or more than 10% of purchase price is paid by CPF), the downpayment will still be 10% of the purchase price. The balance will be paid at the appointment when keys are collected (can be paid by cash or CPF), together with the disbursement of HDB loan. For example, a buyer has CPF that covers 12% of the purchase price (assuming he empties it for easy calculation), and wants to pay cash that is 3% of the purchase price, the loan will be reduced to 85% (assuming he originally was able to get 90% loan). He will still pay 10% downpayment with cash or CPF (5% will still be with the buyer). When collecting keys, loan will be disbursed for 85% of the purchase price. Adding to the downpayment, 95% of the purchase price is already covered. The 5% which is still with the buyer, will also be paid here (by CPF or cash).

As of 28 August 2018, HDB flat buyers can now set aside $20,000 each in their CPF OA when taking up a HDB loan.


Taking a Bank Loan

The downpayment for buyers that are taking bank loan is 20% of the purchase price. A minimum of 5% of the purchase price have to be paid in cash in the downpayment. The remaining 15% for the downpayment can be paid by cash or CPF. The downpayment will be paid during the appointment when the Agreement for Lease (AFL) is signed. Since the maximum loan ceiling is only 75%, there will still be a balance of 5% to be paid during the appointment to collect the keys. It can be paid by CPF or cash.

For a loan ceiling of 55% (loan tenure exceed 25 years or loan tenure will go beyond 65 years of age of buyer), the downpayment is still 20% of the purchase price. A minimum of 10% of the purchase price have to be paid in cash in the downpayment. The remaining 10% for the downpayment can be paid by cash or CPF. The downpayment will be paid during the appointment when the Agreement for Lease (AFL) is signed. Since the loan ceiling is only 55%, there will still be a balance of 25% to be paid during the appointment to collect the keys. It can be paid by CPF or cash.

There are also variations of the above case. Buyers can pay more cash and use less CPF savings and/or take less loan. If buyers only take up a loan that is 70% of purchase price and they have less than 15% CPF savings, then the balance of another 15% will have to be paid in cash (5% of purchase price will be in downpayment for cash component). However, the downpayment will still be 20%. We believe that if the loan is eventually more than 55% of the purchase price, it will follow the rules when loan ceiling is 75% (5% of the purchase price minimum cash in downpayment). If the loan is eventually less than or equivalent to 55% of the purchase price, it will follow the rules when loan ceiling is 55% (10% of the purchase price minimum cash in downpayment).

The option/booking fee paid earlier when booking a flat can be used to offset any cash that will be used in downpayment.

Buyers may choose how much CPF savings to use, or not to use at all. However, there is a minimum 5% (or 10%) cash payment of the purchase price, and the maximum loan ceiling is only 75%. The remaining is paid from CPF savings or cash.


Conditions

There are certain conditions when we use our CPF savings. It is explained in a separate article as it is quite a big topic on its own. If you want to know more about it, please click here.


Conclusion

CPF can be very useful in bridging the gap between the limited cash that most people have and the loan limit. However, do take note of its drawbacks and conditions that are bounded to its usage.


cpf downpayment table

CPF Downpayment for New HDB Flats


Please do note the the differences between the downpayment of a resale flat and a new flat purchased directly from HDB. As we can see from the table, the downpayments for new flats are 10% and 20%, depending on the loan that you are taking. For resale transactions, the "downpayment" is just the option fee and the exercising fee, which is capped at $5,000, and it is regardless of the type of loan that you are taking. The loan disbursement and balance is paid at the HDB appointment itself. The percentage mix of cash, CPF and loan is more direct.



Date first posted on 18 June 2019; Last Edited on 18 June 2019

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