How To Adjust Your CPF Payments For Your Home Loan
Using your Central Provident Fund (CPF) Ordinary Account (OA) savings in Singapore to buy a home is pretty common. After all, that is the main reason for the facility in the first place.
Rising property costs have led many Singaporeans to depend on their CPF contributions to pay their monthly mortgages, and so far, so good.
The challenge, however, remains in adopting the right mortgage repayment strategy so that you do not deplete your CPF savings.
This article will tell you everything you need to know on how to use your CPF to pay your housing loans and how to adjust your CPF payment for your housing loan.
How Do I Use My CPF For Paying My Monthly Installments?
In Singapore, using CPF to pay monthly installments is one of the main reasons for an increase in homeownership.
Unfortunately, the facility can be confusing and time-consuming at times.
Below is a simple guide any Singaporean can use when planning to use their CPF to pay monthly installments for a property.
Before using your CPF for paying monthly installments on a property, consider the following:
- Financial implications: How will your homeownership journey affect your lifestyle and finances?
- Type of borrowing: What are the terms for a bank and an HDB loan repayment? And which one is more pocket-friendly?
- Your plan for your CPF in the future: Your CPF savings serve as an emergency fund in retirement. So between using cash and your CPF savings, which would serve you better in the long run?
- Housing limits: How much CPF savings are you willing to part with monthly for a property?
Once you are certain that you know about the above things, you can proceed to check whether it is possible to use your CPF savings for a specific property.
In Singapore, you can only use your CPF OA savings when buying private residential properties or a HDB flat.
When buying a HDB flat, check whether a property meets the eligibility criteria with the Housing Development Board.
The Urban Redevelopment Authority provides eligibility information for private residential properties.
Applying To Use Your CPF For A Property
Your application to use your CPF to buy a property depends on the loan and property type.
If you own a HDB flat without a loan or are using an HDB loan, you will need to fill out and sign a CPF withdrawal form at the HDB office.
If the property is a resale flat, you could apply online or at the HDB office.
If you own private property without a loan or are using a bank loan, you will need to get a lawyer.
The lawyer is to apply on your behalf, following your authorisation. A signed letter of authorisation, declaration, consent and agreement from you, are required.
In this instance, your application will be successful only if:
- Every legal documentation is properly done
- At the time of purchase, a downpayment of at least 5% of the lower purchase or valuation price is paid
- The option rates are paid
After considering the CPF lump sum and housing loan payment, any balance purchase fee above the property’s value is then paid.
Using Your CPF For A Property
Once your application is approved, follow the steps below to set and pay your CPF monthly installments:
- Visit the CPF Website and login.
- On your portal, click on My Request.
- Under Property, click on Use CPF for my Property.
- Choose the property details.
- Then, Revise Monthly Installment.
- Update monthly installment amount and effective date.
- Confirm and submit the request.
Apart from using your CPF to pay monthly loans, you can also use your CPF savings for the following:
- Purchasing vacant land (only for private property)
- Paying stamp and legal fees
- Making a downpayment
- Paying Home Protection Scheme premiums (only for HDB flats)
- House construction
How To Make Changes To Your Monthly CPF Deductions For Your Home Loan
The good news is: You don’t need to worry about how to adjust CPF payments for housing loans because the CPF Board has used the internet to make everything faster and easier.
Follow these steps to change your CPF contribution for a housing loan.
Step 1: Log In To The CPF Site
Visit https://www.cpf.gov.sg/member. On the upper right section, click Login. Access your site by scanning the QR code with your smartphone or inputting your Singpass password.
Step 2: Locate The Homeownership Link
After a successful login, you will be directed to your portal homepage. On the left-hand side, click on home ownership.
You will then be led to another page where you will see your property address. Then scroll down to the monthly CPF deduction part.
Step 3: Pay Attention To The On-Screen Prompts
This is a crucial step to changing CPF’s contribution to housing loans.
The system will direct you according to the type of property you own. For instance, if it’s a HDB flat, it will prompt you so you know how to adjust your CPF payments at the HDB website.
Make your changes through the appropriate link.
Step 4: Confirm Changes And Submit
After making the necessary adjustments, read through the terms and conditions. Then confirm your changes and submit them.
You can save or print your transactions for record keeping.
Why You Should Make Changes To Your CPF Housing Payments
Using your CPF to pay monthly installments is not necessarily a set-it-and-forget-it deal.
Here are three common scenarios when you may need to make changes or adjustments to your CPF monthly deductions.
Changes In CPF Contributions At 35 Years
When you turn 35 years old, the CPF percentage contribution going into your Ordinary Account (OA) is lowered in favour of your MediSave and Special Accounts.
This may lead to a shortfall in the portion of your CPF savings that covers your housing payments.
As such, reducing your CPF housing loan payment would be wise to avoid incurring fees for late payments or overdue charges.
You Wish To Preserve More Of Your CPF Savings For Retirement
As you get older, it becomes more urgent to plan for your retirement.
In Singapore, once you are 55 years old, your OA and Special Account are merged to form a Retirement Account.
The funds in your Retirement Account don’t just sit there. They are used for an annuity plan called CPF LIFE to ensure lifelong income support when you retire.
The more the funds you have in your Retirement Account, the higher the payments you will receive upon retirement.
Therefore, reducing your monthly CPF deductions would be prudent.
Your CPF Ordinary Account Is Dried Out
Over time, your savings in your CPF account may get depleted.
When this happens, if you still want to keep your property, you will have to service your housing loan in cash.
Please note, do not attempt to utilise a credit line to pay a housing loan. This is a risky move as it may cause you to accrue even more debts.
Legal Representation For CPF And Housing Loans
There is a CPF payment situation that you may not undertake on your own as legal representation is required.
If you want to use your CPF savings to pay for a residential property or unit, you should appoint a legal firm to act on your behalf.
The legal firm has to apply to the CPF Board requesting permission to use your funds for a housing loan.
This professional service is known as conveyancing and is not free. Research how much conveyancing your property will cost before settling on a firm.
If it is a HDB unit that you are looking to purchase, the HDB, through its legal partners, may act on your behalf. Alternatively, you can get your own lawyer.
It goes without saying that CPF contributions are of great help in property ownership, and a necessary facility in your retirement years.
This is why you have to make wise decisions on your CPF mortgage payments if you want a significant retirement package in your old age.
You should only exercise your power to start, amend or stop your CPF savings after careful deliberations.
Before purchasing a property, check its terms and conditions for using CPF, so you do not deplete your savings.
When selling the property, restore the CPF amount you used when buying and the interest accrued.
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