The Central Provident Fund (CPF) is a compulsory social security savings scheme funded by contributions from employees and employers.
It is a crucial pillar of Singapore’s social security system that helps to meet the citizens’ retirement, health, and housing needs. But some are unaware of how they can use their CPF savings to repay their home loans.
Allowing the use of CPF funds to pay for housing needs is the main reason for the high homeownership rate in Singapore. Given the country’s high housing costs, many Singaporeans usually depend on their CPF savings to pay off their monthly mortgages.
However, using these savings also requires you to know how to adjust CPF payment for housing loan.
Fortunately, you can adjust to such a change online. This guide will look at how and how to adjust CPF payment for housing loan. Let’s dive in.
How Do I Use My CPF For Paying My Monthly Installment?
Before using your CPF savings, ensure that you’ve informed your lawyer of your intention to use these funds in your home loan application.
Keep in mind all the legal fees you’ll incur and the processing fees the bank charges.
Once you’ve completed these processes, you can now follow the steps below to use your CPF to pay monthly installments:
Step 1: Visit the CPF website and log in with your Singpass
Step 2: Select “My Request”
Step 3: Select “Property” and go to “Use CPF for my Property”
Step 4: Select Property details
Step 5: Select “Revise Monthly Installment”
Step 6: Update the Monthly Installment amount and effective date
Step 7: Submit your request
How Does CPF Work?
While most Singaporeans actively contribute to their CPF accounts, not many know exactly how they work.
In a nutshell, CPF works as the social security net and a savings account you can use to repay your mortgage loan. CPF has four accounts, and every account has its particular role:
- Ordinary Account (OA)
- Special Account (SA)
- Retirement Account (RA) once you’re 55 years old
The OA is the most popular account used for CPF mortgage payment. Most people are unaware that the funds used or borrowed from their OA have to be repaid and not only the principal amount, but the accrued interest as well.
So if you want to pay a HDB loan using CPF, keep that in mind.
How To Make Changes To Your Monthly CPF Deductions For A Home Loan
Read on if you’re looking to find out how to adjust CPF payment for housing loan.
Most Singaporeans use their OAs to make monthly CPF deductions for home loans. That said, you can commence paying, adjust, and stop your OA savings for your housing requirements such as monthly installments. You can also use your OA savings to make full or partial capital repayment.
Also, if you’ve purchased a HDB with a HDB loan, you can approach HDB to begin and adjust your OA use and make your loan repayment.
To know how to adjust CPF payment for housing loan, follow the steps outlined below:
Step 1: Log in to your CPF personal page
Step 2: Go to the Homeownership page
Step 3: Follow the on-screen prompts
Step 4: Confirm your changes and submit
It’s advisable to print or save a copy of your transactions for your records.
Why You Should Make Changes To Your CPF Housing Payments
Now that you know how to vary the CPF funds amount used to pay your home loans, you may be wondering why you might need to do this in the first place. Well, here are some reasons.
Changes In CPF Contributions From Age 35
Once you reach 35 years of age, the section of your CPF contributions that go into your OA is reduced in favour of your MediSave and SA.
As a result, you may notice that your OA contributions are insufficient to cover your home loan repayments fully.
In this case, it would be wise to reduce your CPF deductions and make up for the shortfall in cash. Or else, you could incur late fees or overdue charges on your mortgage.
You Want To Preserve More CPF Savings For Retirement Or Other Uses
Once you hit 55 years old, your SA and OA are combined to form the RA. These funds are used to contribute to the national unity scheme called CPF Life, which offers you lifelong income during retirement.
The more money you have in your RA, the higher the CPF Life payouts. As a result, you may want to decrease the amount of CPF funds removed from your OA to have a more comfortable retirement.
Your CPF OA Has No More Money
Once the CPF OA has run out, you have no option but to pay for your housing loan in cash. That is if you want to continue owning your property.
So if you expect this to happen, you might make the change on your own instead of waiting to be removed from the system.
Legal Representation For CPF And Housing Loans
As mentioned in the beginning, you’ll need to appoint a legal firm to represent you before using your CPF funds to pay for your housing.
Your appointed attorney has to apply to the CPF Board to request the use of your CPF funds. This process is called conveyancing and will require legal fees.
It’s essential to shop around and compare the rates to understand how much conveyancing fees you’ll incur. Remember that if you’re buying a HDB unit, you may opt for HDB to represent you via its panel of appointed legal firms. Or you can appoint your own attorney if you wish.
Otherwise, if you’re buying a private residential property, you will be required to appoint a conveyancing attorney on your own. It would be best if you did this before submitting the mortgage application.
Other Things You Need To Know About CPF And Housing Loans
You Can Make Partial Repayments, Or Adjust Your Loan Tenure
You can change the amount of your housing loan installments using various means. One method is to adjust your loan’s tenure.
You will lower your monthly installment by lengthening it, while shortening will raise the amount. Another method is to make lump-sum partial repayments towards the mortgage. This reduces the amount outstanding in the home loan, which will allow you to:
- Reduce the monthly installment while at the same time maintaining the original loan tenure
- Shorten the overall loan tenure while maintaining the installment amount
- Make sure to approach your financier, either HDB or your bank, for more information
You Can Utilise Your CPF Funds to Pay For Private Property And HDB
Most people are not aware of this, but it’s true. You can utilise your CPF funds to pay for a residential property, whether private property or an HDB flat.
However, you cannot use a HDB loan to buy a private residence.
HDB loans only cater to those purchasing an HDB flat. For private properties, you must get a mortgage from an authorised financial institution or a bank and learn more about your HDB monthly installment.
So if you’re looking to purchase your first home or move on to the next, U Credit has got you covered.
We pride ourselves on offering some of Singapore’s most affordable interest rates. With us, your needs always come first.
Apply for a loan now in just five minutes or contact us for more information. We will be more than happy to hear from you.