Rules on CPF and HDB Housing Loan Changed – Less Rigidness to Buy a Home for Life While Preserving the Retirement Competence
Singaporeans whom intend to buy a home as a long term investment, the guidelines on CPF usage and HDB housing loans have been altered to provide more flexibility whilst protecting their retirement acceptability. These new standards now primarily revolve around the balance lease a home can cover the youngest buyer up until the age of 95. Therefore, these buyers are eligible to apply for maximum CPF usage and HDB housing loans. However, those of which whom do not qualify for these would still be able to use CPF and apply for a HDB housing loan though that amount will be pro-rated. These newly updated rules will be applied from the 10th of May 2019, hence will not affect majority of the home buyers of which have already purchased a property that’ll last them till the age of 95.
Information to CPF Rules for All Properties
Use of CPF for Property Purchase
The usage of CPF for property purchases was previously focused on the remaining lease of the property whereby for remains of 60 years or more, the buyers would use CPF to pay up to the valuation limit. Meanwhile, for those of 30 years to less than 60 years, the buyers would use CPF for the remaining lease of the property to cover up the youngest buyer up to the minimum age of 80 and the total amount of the CPF would be capped at the pro-rated VL.
A primary reason why these rules are to be reconditioned is due to the nuance needs and longer life-expectancy of the Singaporean population. Based on these new rules, purchase of property using CPF is dependent on the balance lease that the property can cover for the youngest buyer up to the age of 95. For when the remaining lease of property is more than 20 years and can cover the youngest buyer until at least the age of 95, the new rule would be such that the buyer is eligible to use CPF to buy the property up until the VL limit while when the remaining isn’t, the use of CPF will be pro-rated in order to aide them to put aside CPF savings for their housing during retirement.
There is a minimum lease requirement set for the use of CPF for property buying, whereby it will be lowered to 20 years from 30, in parallel with the current requirements of HDB loans. This is to safeguard the usage of CPF funds.
CPF Withdrawal Rules After Age 55 With a Property
Formerly, for CPF members of 55 years and above would be able to withdraw their CPF savings up to an amount higher than the Basic Retirement Sum (BRS) provided they property they owned as a remaining lease of minimum 30 years in order to safeguard themselves to have a home whilst having a basic income. In order to promote more CPF members to have a home for life and a profound foundation of retirement income, members are required to have a property that has enough of a lease to sustain them till the age of 95 before withdrawing their CPF above the level of BRS. Currently, all HDB flats and a vast number of private properties have leases that would sustain a 55-year-old up to the age of 95, hence this update is estimated to not affect majority CPF members.
Information to HDB Housing Loan Rules for Flat Buyers
Earlier, there were restrictions for HDB flat buyers on how much loan they are allowed to take to but a new flat with outstanding contracts of 60 years and below. The new update will allow buyers to take a full HDB housing loan of 90 % Loan-to-Value (LTV) limit, given that the existing loan of the flat will accommodate the youngest buyer until the age of 95.
Moving forward, the youngest buyer can still ask for an HDB loan if the existing rent of the flat cannot cover the youngest buyer but the LTV limit will be pro-rated from 90%, based on the extent that the remaining lease can cover the youngest buyer to the age of 95. In conclusion, there are more flexibility for buyers when buying a home for life at the same time protecting their retirement capability. You can find the updated rules on the usage of CPF and HDB housing loan in Annex A while examples of how updates will affect buyers are in Annex B. More details on the CPF changes on the CPF can be found in Annex C.
Some of the areas the updated rules will apply to are HDB flats applications which were acknowledged on or after 10 May 2019, Private properties and Executive Condominium units which have the option to Purchase or Sales & Purchase Agreement signed on or after 10 May 2019 and CPF withdrawals which were received on or after 10 May 2019.
These changes are not applicable to buyers who have bought assets before 10 May 2019 and those who are still servicing their housing loans. Those who purchased their property and turned 55 years old before 10 May 2019 are allowed to apply to CPF Board to take out their CPF savings above their BRS under the previous rules. You can come forward to the CPF Board or HDB for more explanations and help for those who are halfway through a property purchase. Members can call the following numbers for enquiries:
- CPF Board Service Line: 1800-227-1188
- Write to CPF: cpf.gov.sg/askcpf
- HDB Sales/Resale Customer Service Line: 1800-866-3066
- HDB Branch Service Line: 1800-225-5432
Updated Rules on CPF Usage and HDB Housing Loan
For properties which cover the youngest buyer to the age of more than 95 or 95 years, when using CPF funds, members are allowed and are subjected to valuation limit (or applicable withdrawal limits if higher); and if the remaining lease at the point of purchase is more than 20 years. For those above 95 years, they are allowed, or subjected to Valuation Limit pro-rated according to the extent that the remaining lease can cover the youngest buyer using CPF to the age of 95; and remaining lease at the point of purchase is more than 20 years. On the other hand, when taking the HDB housing loan, if the members are less than 95 or is 95 years, there are allowed, and subjected to Loan-to-Value (LTV) limit of 90%; and Loan tenure is the shortest of 25 years, 65 years minus the average age of the buyers, or remaining lease at the point of purchase minus 20 years while if the member is over 95 years, there are allowed, and subjected to LTV limit of 90% which is pro-rated based on the extent that the remaining lease can cover the youngest buyer to the age of 95; and Loan tenure which is the shortest of 25 years, 65 years minus the average age of the buyers, or remaining lease at the point of purchase minus 20 years.
Does the Update Mean Anything to Property Buyers?
Based on the explanation from above we can conclude three possibilities that is most buyers will not be affected by the changes, there would be lesser restrictions for those who buy a home for life using their CPF and anyone who purchases a home with a remaining lease that does not protect them until the age of 95 can use CPF and ask for a HBD housing loan, given that it protects their retirement capabilities.
Additional Information on CPF Changes
Significant changes to purchase of more than one property using CPF: Earlier, the Basic Retirement Sum (BRS) was needed to be set aside before excess Ordinary Account (OA) monies could be used to purchase second or subsequent properties. Starting from May 10, 2019, those who bought ant properties using CPF monies that covers them until at least the age of 95 will need to set aside the Full Retirement Sum before using excess OA monies to purchase second or consequent properties. Those who are not affected are those who have a property with a remaining lease that covers them until at least the age of 95.
Important changes to CPF usage after age 55: Those who purchase for May 10, 2019, the remaining lease of the property needs to cover the buyer until at least the age of 95 for the buyer to use Retirement Account (RA) savings above the BRS to pay for the property. Members approaching age 55 can ask CPF Board to reserve their OA savings so that they may continue servicing their mortgage payments after the age of 55. The HDB or CPF Board for is there for assistance for those facing difficulty servicing their housing loans.