More Flexibility to Buy a Home for Life While Safeguarding Retirement Adequacy
JOINT MND-MOM PRESS RELEASE
Rules on CPF usage and HDB housing loans have been updated to provide more flexibility for Singaporeans to buy a home for life, while safeguarding their retirement adequacy. The rules will now focus on whether the remaining lease of the home can cover the youngest buyer until at least the age of 95. If so, home buyers will be allowed to obtain maximum CPF usage and HDB housing loan (for HDB flat buyers). Those who do not meet this criteria will still be able to use CPF and take up an HDB housing loan, but the amount will be pro-rated.
2. The updated rules will take effect from 10 May 2019. Majority of home buyers will not be affected as they are already purchasing a property which lasts them to the age of 95.
Updates to CPF rules for all properties
Use of CPF for property purchase
3. Previously, the use of CPF to buy properties focused on the remaining lease of the property:
| Remaining lease of property |
Previous rules on total use of CPF |
60 years or more |
Buyer can use CPF to pay for the property up to the Valuation Limit (VL) |
| 30 years to less than 60 years |
• Buyer can use CPF if the remaining lease of the property covers the youngest buyer until at least the age of 80
• Total amount of CPF that can be used is capped at pro-rated VL |
4. These rules have to be updated to take into account the changing needs and higher life expectancy of Singaporeans. Under the new rules, the total amount of CPF that can be used for property purchase will depend on the extent the remaining lease of the property can cover the youngest buyer to the age of 95.
| Remaining lease of property is more than 20 years and can cover youngest buyer until at least the age of 95 |
New rules on total use of CPF (with effect from 10 May 2019) |
Yes |
Buyer can use CPF to pay for the property up to the VL
|
| No |
Use of CPF will be pro-rated based on the extent the remaining lease of the property can cover the youngest buyer to the age of 95. This will help buyers set aside CPF savings for their housing needs during retirement (e.g. a replacement property). |
5. To ensure prudent use of CPF monies, there will still be a minimum lease requirement for the use of CPF for property purchases. This will be lowered to 20 years (from the existing 30 years), in line with the existing criteria for HDB loans.
CPF withdrawal rules after age 55 with a property
6. Previously, CPF members above the age of 55 could withdraw their CPF savings above the Basic Retirement Sum (BRS) if they owned a property with a remaining lease of at least 30 years. This was to ensure that they have secured a home in retirement and a basic level of retirement income.
7. To encourage CPF members to have a home for life and to secure at least a basic level of retirement income, CPF members will now need to have a property with sufficient remaining lease to cover them until at least the age of 95, before they can withdraw their CPF savings above the BRS. This change is not expected to affect most CPF members, as all HDB flats and the vast majority of private properties have leases that can last a 55-year old member until the age of 95.
Updates to HDB housing loan rules for flat buyers
8. Previously, buyers of HDB flats faced restrictions on the amount of HDB housing loan they could get to purchase flats with remaining leases of less than 60 years.
9. With this update, buyers will now be able to take an HDB housing loan of up to the full 90% Loan-to-Value (LTV) limit , if the remaining lease of the flat can cover the youngest buyer to the age of 95.
10. If the remaining lease of the flat cannot cover the youngest buyer to the age of 95, they can still take an HDB loan 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.
11. Put together, these changes will give buyers more flexibility when buying a home for life while safeguarding their retirement adequacy. A summary of the updated rules on CPF usage and HDB housing loan is in Annex A. Examples of how buyers will be affected by the updates are in Annex B. Further details on the CPF changes are in Annex C.
Implementation
12. The updated rules will apply to:
• HDB flats: Flat applications received on or after 10 May 2019.
• Private properties and Executive Condominium units: Option to Purchase or Sales & Purchase Agreement signed on or after 10 May 2019.
• CPF withdrawals: Applications received on or after 10 May 2019.
13. Buyers can click on the following links to use the online calculators to compute their allowable CPF usage (public and private housing) and HDB housing loan:
• CPF usage
• HDB housing loan
New flat
Resale flat
14. Buyers who bought properties before 10 May 2019 and are still servicing their housing loans will not be affected by these changes. Members who bought their property and turned 55 years old before 10 May 2019 can continue to apply to CPF Board to withdraw their CPF savings above their BRS under the previous rules.
15. Those who are mid-way through a property purchase can approach CPF Board or HDB for clarifications and assistance.
16. For enquiries, members of the public can contact:
CPF usage
• CPF Board Service Line : 1800-227-1188
• Write to us : cpf.gov.sg/askcpf
HDB housing loan
• HDB Sales/Resale Customer Service Line : 1800-866-3066
• HDB Branch Service Line : 1800-225-5432
Issued by : MND & MOM
Date : 9 May 2019
Annex A
Updated Rules on CPF Usage and HDB Housing Loan
| Property Covers Youngest Buyer To Age |
Use of CPF Funds
(private & public housing) |
HDB Housing Loan
(public housing) |
| ≥ 95 years |
Allowed, subject to:
• Valuation Limit (or applicable withdrawal limits if higher); and
• Remaining lease at the point of purchase^ is more than 20 years. |
Allowed, subject 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.
|
| < 95 years |
Allowed, subject 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. |
Allowed, subject to:
• LTV limit of 90% is pro-rated based on the extent that the remaining lease can cover the youngest buyer to the age of 95; 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.
|
^For HDB flats, the point of purchase refers to the flat application date. For private properties and Executive Condominium units, the point of purchase refers to the Option to Purchase or the Sale & Purchase Agreement exercised date.
Annex B
What The Updates Mean to Property Buyers
A. Majority of buyers will not be affected by the changes.
Example 1: Sammy and Devi are both 25 years old; they just got married and are buying their first home.
| Age of Youngest Buyer |
25 years old |
| Property Type |
5-room resale HDB flat
85 years remaining lease
[i.e. lease covers Sammy and Devi until at least the age of 95] |
Lower of Property Price or Market Value
|
$430,000 |
The couple’s maximum CPF usage and HDB housing loan limits are not affected by the updated rules.
As the property covers them until at least age 95, they may also request to withdraw CPF savings above their Basic Retirement Sum (BRS) when they turn 55.
| |
Before 10 May 2019 |
From 10 May 2019 |
| Maximum CPF Usage |
100%* Valuation Limit
($430,000) |
100%* Valuation Limit
($430,000) |
| HDB Housing Loan |
90% Loan-to-Value
($387,000) |
90% Loan-to-Value
($387,000) |
*Applicable limit for buyers who have not set aside the BRS. Usage beyond the Valuation Limit (up to applicable limits) is allowed if the property buyers have accumulated their BRS.
Note:
1. Banks also take reference from CPF restrictions when assessing how much loan to lend.
2. Actual loan amount is subject to credit assessment which takes into account, among others, buyer’s income and age.
B. Those who buy a home for life would face less restrictions on their CPF usage.
Example 2: John (age 48) and Jane (age 45) are buying a flat to move closer to their parents’ homes.
| Age of Youngest Buyer |
45 years old |
| Property Type |
4-room resale HDB flat
50 years remaining lease
[i.e. lease covers youngest buyer (Jane) until at least the age of 95] |
| Lower of Property Price or Market Value |
$430,000 |
Under the updated rules, the couple may use up to $86,000 more of their combined CPF savings to buy the flat. Their HDB housing loan does not change.
As the property covers them to age 95, they may also request to withdraw CPF savings above their BRS from the age of 55.
| |
Before 10 May 2019 |
From 10 May 2019 |
| Maximum CPF Usage |
80% Valuation Limit
($344,000)
|
100%* Valuation Limit
↑20%
($430,000) |
| HDB Housing Loan |
90% Loan-to-Value
($387,000) |
90% Loan-to-Value
($387,000) |
*Applicable limit for buyers who have not set aside the BRS. Usage beyond the Valuation Limit (up to applicable limits) is allowed if the property buyers have accumulated their BRS.
Note:
1. Banks also take reference from CPF restrictions when assessing how much loan to lend.
2. Actual loan amount is subject to credit assessment which takes into account, among others, buyer’s income and age.
C. Those who buy a home with a remaining lease that does not cover them to the age of 95 will be able to use CPF and take up an HDB housing loan, with limits to safeguard their retirement adequacy.
Example 3: Nick and Cheryl are both 25 years old; they just got married and want to buy their first home.
| Age of Youngest Buyer |
25 years old |
| Property Type |
4-room resale HDB flat
65 years remaining lease
[i.e. lease does not cover Nick and Cheryl until at least the age of 95] |
| Lower of Property Price or Market Value |
$430,000 |
Under the updated rules, the maximum CPF usage is reduced by $43,000 while the HDB housing loan is reduced by $38,700.
| |
Before 10 May 2019 |
From 10 May 2019 |
| Maximum CPF Usage |
100%* Valuation Limit
($430,000) |
90% Valuation Limit
↓10%
($387,000) |
| HDB Housing Loan |
90% Loan-to-Value
($387,000) |
81% Loan-to-Value
↓9%
($348,300) |
*Applicable limit for buyers who have not set aside the BRS. Usage beyond the Valuation Limit (up to applicable limits) is allowed if the property buyers have accumulated their BRS.
Note:
1. Banks also take reference from CPF restrictions when assessing how much loan to lend.
2. Actual loan amount is subject to credit assessment which takes into account, among others, buyer’s income and age.
As the property does not cover them to the age of 95, they will not be able to withdraw CPF savings above their BRS from the age of 55 (except for the first $5,000 from the age of 55, and 20% of their RA savings from their payout eligibility age).
If they buy a flat which has a longer lease coverage, they will be able to use more CPF. Their HDB housing loan will also be higher.
| |
Remaining Lease = 55
(lease coverage = 80 years) |
Remaining Lease = 65
(lease coverage = 90 years) |
Remaining Lease = 75
(lease coverage = 100 years) |
| Maximum CPF Usage |
70% Valuation Limit
($301,000) |
90% Valuation Limit
($387,000) |
100%* Valuation Limit
($430,000) |
| HDB Housing Loan |
63% Loan-to-Value
($270,900) |
81% Loan-to-Value
($348,300) |
90% Loan-to-Value
($387,000) |
*Applicable limit for buyers who have not set aside the BRS. Usage beyond the Valuation Limit (up to applicable limits) is allowed if the property buyers have accumulated their BRS.
Note: Examples above assume lower of price or market value is $430,000 across all flats.
Annex C
Further Information on CPF Changes
Consequential changes to purchase of multiple properties using CPF: Previously, CPF members needed to set aside the Basic Retirement Sum (BRS) before excess Ordinary Account (OA) monies could be used to purchase second or subsequent properties. From 10 May 2019, members who do not have any property bought 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 subsequent properties. Members who have a property with remaining lease that covers them until at least the age of 95 will not be affected (i.e. previous rules apply). Members in a buy-first-sell-later situation are not affected if they dispose of their previous property within the six-month grace period.
Consequential changes to CPF usage after age 55: For purchases from 10 May 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. Those facing difficulty servicing their housing loans can approach HDB or CPF Board for assistance.