Personal Finance

How To Pay Back Your CPF Housing Loan

November 16, 2022

If you’re a homeowner, you may have used your CPF Ordinary Account (OA) savings to purchase your home.

Whether you are buying a private property or a HDB flat, you can use your OA funds to pay for your monthly home loan repayment and the initial downpayment.

However, this means all the OA funds that you use, along with the accumulated interest, will be “owed” to your CPF account. You need to repay this amount.

In this article, we’ll look at how to pay back CPF housing loan, why you should make a voluntary refund, and how much.

CPF Housing Loan Explained

The amount you “owe” your CPF OA is not a fixed figure, and it continues compounding at 2.5% annually until you make the refund. This is commonly known as the accrued interest on the funds used for your home purchase.

If you’re buying a HDB flat, you may get housing grants. Housing grants are paid into your CPF OA, forming your OA funds. But you are required to refund any part of the housing grant plus the accumulated interest you use for your home purchase.

As you would have used a significant amount of your CPF OA funds for your home purchase plus the monthly home loan repayments, you may be shocked after selling your home to find out how much you’ll need to refund to your CPF OA.

Note that this is completely different from clearing your home loan and doesn’t affect the amount you owe the bank or have to continue paying for your private property or HDB monthly home loan.

Even after you repay your home loan, you still have the funds you owe your CPF OA. In most cases, it doesn’t matter how much you owe your CPF OA account because:

You’ll only be required to refund the amount after selling your property
If there’s an insufficient amount after selling your property, you usually don’t have to make your refunds in cash
Even after refunding, you can use the bulk of these refunded funds for your next home purchase

You can check the amount you owe by logging into your CPF portal under the Home Ownership dashboard.

There, you can see the total principal amount withdrawn, which is the actual amount that you have used and the total accumulated interest.

You’ll also have to refund the interest you earned if you kept the principal amount in your CPF. You will need to refund this amount to your CPF OA after selling the property.

There are valid reasons to make a Voluntary Housing Refund (VHR) while still living in your home.

Why You Should Make A Voluntary Refund

Here are some reasons why you should make a voluntary refund.

To Have Cash On Hand For Renovations Or Downpayment

By making a VHR to your CPF OA, you lower the amount you “owe” your CPF OA. This reduces the amount of accumulated interest.

So if you’re able to pay off a substantial part of the amount, you’ll have more funds on hand when you eventually sell your home. This significantly lowers any miscalculation you might make when you purchase a property in the future.

For instance, you could erroneously earmark cash proceeds for Cash Over Valuation (COV) or a downpayment on your new home – only to discover you have a shortfall due to the amount you have to refund back to your CPF account.

You could also be left short on funds to pay for renovation or stamp duty. This can jeopardise your plan to move into your new home.

Less Stress When You Sell Your Property

When you sell your home, you can use the proceeds to pay off your remaining home loan and make the required CPF refund.
This can make it difficult to know funds you’ll be left with, especially if you use the proceeds to purchase a new home. Or perhaps you’re thinking of using it in different ways such as starting a business, investing, or paying off debt.

If you’re over 55 years old, there’s even more stress. When you turn 55, your OA funds will be redirected to your Retirement Account (RA) to set aside the Full Retirement Sum (FRS) of $192,000.

Even if you plan to pledge your property as collateral, you still need to keep the Basic Retirement Sum (BRS) of $96,000 in your RA for retirement.

If you are not financially ready, this can put your whole plan at risk. This amount is not insignificant as it is $96,000 (BRS) or $192,000 (FRS) for those over the age of 55.

Earn 2.5% Interest Rate On Funds Earmarked For Your Next Home Purchase

By making a Voluntary Housing Refund to your CPF OA earlier than necessary, you’ll be able to grow a pot of gold meant for your next home purchase.

When saving up for your next home, you still want to earn a substantial interest return. Using the CPF OA to earn 2.5% annually can offer a much higher risk-free interest, as compared to the interest rate of fixed deposits, savings accounts, or cash management accounts.

It becomes an attractive proposition when you can compound your next home purchase at 2.5%. Remember that once you’re ready to buy a new home, you must ensure you have enough on hand to pay for a minimum of 5% of your downpayment in cash, as well as other property-related expenses that you may incur in cash.

Leverage On The Relatively Good Interest Rate Beyond The Full Retirement Amount

This applies to those below the age of 55 who have already achieved the Full Retirement Sum (FRS) within their Special Account.

These individuals would be unable to tap on the Retirement Sum Topping Up (RSTU) Scheme to top up their Special Accounts (SA) with.

If you belong to this category, you can use the Voluntary Housing Refund to add funds into your CPF to earn a stable 2.5% return annually.

Alternatively, you can make the Voluntary Contributions (VC) annually, but it’s capped at $37,740 – inclusive of your CPF contributions from employment.

Individuals above 55 years old should continue tapping on the RSTU to a maximum of the Enhanced Retirement Sum (ERS) instead. This earns you 4% annually and offers tax benefits. Another special instance will be for individuals about to turn 55.

If they already have set the FRS aside in their Special Accounts, they can convert their cash savings into Special Account Funds and still be able to withdraw the funds like an ATM.

How Much Voluntary Housing Refund To Make

You can refund any amount, capped at the full principal amount withdrawn with the accumulated interest.

You can check the precise amount you can refund by visiting CPF under the Home Ownership dashboard. It’s also important to note that there is no tax relief for VHRs.

This is because you are only refunding the OA funds that you withdrew for housing. Moreover, you already benefited from the tax relief for the OA money when your work employment contributions went into your CPF account.

You can also find the accumulated interest owed even without using an online calculator. Simply visit the CPF website to determine the amount.

From there, scroll to Section C under the Property section to find the net amount used, as well as the accumulated interest.

This is the amount to return to your CPF account after selling your property.

How To Make A Voluntary Refund

Now, let’s look at how to make a CPF voluntary housing refund. The process is easy and can be done online. Here are the steps:

Visit the CPF website.
Head over to My Request.
Click on Property.
Select Make a Housing Refund with Cash, and click start.
Use PayNow or eNETS to repay CPF used for housing.

Note that if you’ll use eNETS, the refund takes a working day to be processed, while PayNow is almost instant.

You can also refund your CPF housing loan through the myCPF mobile application available on the Google Play Store or App Store.

Any CPF housing refund done after the age of 55 is different as the refunded funds will first be utilised to meet the FRS for retirement needs.

You can also make partial or full repayment of your housing loan depending on the type of loan you’ve taken.

HDB Loan

Ensure you have enough CPF OA savings and the maximum amount of CPF savings to use for your property purchase.

Here are the steps:

Submit an online application via the HDB’s website with your Singpass.
Go to My Flat, then Purchased Flat, then Financial Info.
Click on Other Related Services, then Partial Capital Repayment/Redemption of Housing Loan.

Your application will be processed within three working days. You can also complete the CPF withdrawal name known as PHS9 at the HDB branch, which can be done by appointment only.

Once you book an appointment, your request will be processed in three to five working days.

Bank Loan

First, get approval from your housing loan financier. Ensure you have enough CPF OA savings and the maximum CPF savings to use for the property.
Visit your Home Ownership dashboard to check your latest CPF usage and the usage limit for your home.
Submit an online application using your Singpass.
For full repayment of your property loan, upload a copy of the bank’s redemption statement and a copy of your lawyer’s legal bill in the application.

Partial repayment takes three working days to be processed, while full repayment takes five working days.

So if you’re looking for a property to purchase or rent, licensed money lender Credit Thirty3 has got you covered.

With years of experience assisting Singaporeans with home loans, we pride ourselves as one of the best licensed money lenders in the country.