How to Buy Property with CPF

CPF and Property in Singapore


In the context of Singapore, buying properties often seems like an unfamiliar experience, especially for young adults who have had no prior knowledge about properties and how they work in Singapore. Since information about property buying and ownership of land is not found in Primary and Secondary education in Singapore, there isn’t much formal advice about property beyond the official government sites. This article is a simple yet comprehensive guide to buying properties in Singapore, revealing how CPF is allocated and educating readers.

Basics of Property

In Singapore, two types of Property exist; Government-owned property and Private Property. An example of a Government-owned property is a Housing Development Board(HDB) Flat, while an example of a Private property is a Condominium or a Bungalow. 80% of the Singaporean population resides in HDB flats, meaning that public housing is most common, unlike most other countries in the world. Properties are further divided into Leaseholds and Freeholds, which differ in terms of tenure and price. In general, the types of housing that will be compared the most are the standard HDB Flat and the standard private property - the condominium. As Leaseholds are the most common property type countrywide, this article will use Leaseholds as the main point of reference.

Methods at Your Disposal:
Bank Loans, CPF and More

To purchase a HDB Flat or a new condo, one requires money, which can be paid for using Bank Loans, HDB Loans, the Central Provident Fund(CPF) which is controlled by the government, and cold, hard, cash.

CPF Basics

CPF money is divided into 3 basic segments - Ordinary Account(OA), Special Account(SA) and Medisave Account (MA). As Medisave is money set aside for medical expenses, it is not relevant to purchasing property.

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Most of the money that is utilised to pay for property comes from the OA of a Singaporean Citizen. This money is money that has been accrued over the years as a portion of the person's income and savings.37% of your savings is distributed into the 3 accounts in this ratio : 23% into OA, 8% into SA and 6% into Medisave. As one grows older, the ratio changes in favour of Medisave, due to a predicted need for medical expenses. Since only money from the OA is used to pay for property, this means that an accumulation of 23% of a person's income between the ages of 18 to 35 will be available for purchasing property in Singapore.(35 is the cut-off point before the ratio drops to 21%) More information about CPF can be found at However, since only adults aged 21 and above can purchase property, that reduces the amount of time remaining to accumulate CPF funds specially for purchasing housing property.

Purchasing A Property:
The Fundamentals

How does one buy a property in Singapore?

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First, the buyer needs to be aged 21 or older, with at least 20% of the price of the property available as the sum of cash(5%) or CPF(15%) earnings. The other 80% can be paid for by a HDB Loan or Bank Loan(Link to article about HDB and Bank Loans). Let us use the case study of a fictional character to illustrate how the system works. Let's assume Bob wants to buy a property in Singapore for the first time, and he is aged 30. A standard HDB has a Leasehold starting from 99 years, but remaining lease varies due to different construction dates. Bob can use CPF to purchase such a property, only if the combined sum of Bob’s current age and the remaining lease has to be at least 80 years. For leaseholds that have less than 30 years remaining, CPF cannot be used at all.

Therefore, it is important to know the type of property you are looking for to be able to use CPF optimally.

If Bob decides to purchase a house with a Leasehold, he will have to use this allocation of money to purchase the property, due to a policy that took effect in 2013.

Assume that the price of his flat is $500,000. Using this handy metric, we can calculate just how much Bob will need to pay for the house. (This does not apply to Studio Apartments.)

Calculations of Loan-to-Value Ratio for 1st Loan


So we can see that the bulk of Bob’s costs will be covered by the bank/HDB loans, so in total he will have to pay $100,000 upfront, which is a sum of his CPF and cash. Repayment of those loans will involve Total Debt Servicing Ratio(TDSR) and Mortgage Service Ratio(MSR), which will be covered in a separate blog post.

Loan Repayment

To calculate the loan and mortgage repayment fee, we need to use the loan repayment period(in years) and the interest rate of the bank to calculate how long it will take to pay off Bob’s loan. Using CPF’s handy calculator app and an interest rate of 1.25%(which is more realistic than 3 or 4%), we can estimate how long it would take to pay off those loans.

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This table shows the difference between a high interest rate and a lower one. There appears to be little variation in the estimated monthly installment, as both loan repayment periods are the same. This means that if Bob starts repaying at the age of 30, he would be done by age 50. We can see that the estimated monthly installment is less than $2000, which is an acceptable amount. Depending on how high Bob’s monthly wages are, he could finish paying even earlier by increasing the estimated monthly installment. We can also deduce that the higher the interest rate, the higher the estimated monthly installment. This means that if estimated monthly installment is kept constant, the loan repayment period increases to compensate for the increasing(or decreasing) interest rate.

Using the handy CPF loan repayment period calculator, we can calculate how long it will take Bob to repay his debt with a steady loan repayment rate of $2000 and interest rate of 3.5%.

A medium interest rate results in a relatively long repayment period, but it is still not an ideal situation for Bob as he will only be able to pay off his debt aged 55. This is probably a realistic indicator as the interest rate is about 3.5%.

In essence, CPF should be used for loan repayment as it will save you a lot of hassle and it is a constant rate. So, make sure to use your CPF wisely for loan repayment!

Withdrawal Limits and
Important Reminders

Most importantly, there will come a time when your CPF usage will be cut off due to hitting the Withdrawal Limitation(WL), which is 120% of the Valuation Limit.

Private Property

Bob's friend Mary is interested in buying private property instead of public housing.

Conveniently, the process for purchasing a house is exactly the same, with several key differences:

  1. Private Property is usually more expensive than HDBs
  2. The lease period of a private property is more varied, and some may be freehold
  3. The Buyer Stamp Duty and Additional Buyer Stamp Duty for private properties is higher by a small margin
  4. Ownership of Private Property is unlimited while one can only own a single HDB flat in Singapore

Finding a Suitable Home

It would be odd for us to give you all this information but not tell you what to do with it. That is why we think that once you have figured out all there is to know about CPF, bank loans and loan repayment, you should look for a knowledgeable Real Estate Agent or Property Consultant to find a home that suits your needs. Every household is different, ranging from childless couples to large nuclear families. Hence, it is nearly impossible to provide a generic piece of advice that would fit everyone. Find a home that fits your needs to maximise the benefits of CPF money.

Taking Action

In a nutshell, just having information about CPF and how the buying system works is not enough for one to make a truly informed decision. Now that you know the basics, it is time to take action by consulting a professional Real Estate Agent or Property Consultant to assist you in planning. Many bad decisions have been made because of a misunderstanding of information or lack of planning, which is why it is better to consult a professional consultant who can help.

Property purchase comes with a huge commitment, which is why at New Condos Asia, we have a personal consultation function which is tailored specifically to customers' needs. For those interested in buying Private Properties, New Condos Asia has a wide range of coverage with knowledge and insight about different properties all over Singapore.

Take action today so that you can start enjoying your comfortable new home as soon as possible.