When you purchase a HDB flat or a private property, you can use some of the money in your CPF Ordinary Account (OA) to fund your downpayment and monthly repayments.
However, you still owe that money to your CPF, and you are required to pay back this amount in full, including the principal and the interest.
But hold on, it’s your money, so why should you pay it back?
There are many benefits you will enjoy when you make refunds to your CPF account. This article explores the many benefits of CPF housing refunds, and how to pay back CPF housing loan.
What Is A CPF Housing Refund?
As mentioned, you can use your CPF savings to fund your housing, for a downpayment or monthly installments.
However, you still owe that money to your CPF, and you’re required to pay it back.
A CPF housing refund allows you to pay back the money you owe to your CPF account once you sell your home.
This amount you owe is not just the principal. You also owe interest, which is compounded at 2.5% per annum until you repay the CPF funds you used for your housing.
To know how to pay back CPF housing loan, you can log in to your CPF Portal to see how much principal you owe, plus the accrued interest under the Home Ownership dashboard.
So how do you know when to pay and to where?
If you have purchased a HDB flat and received a housing grant, you’re also required to pay this amount to your CPF OA.
Remember: Housing grants are mandated to be paid to your CPF, so if you have used this money to fund your housing, you have to refund it – plus the interest.
This means that once you have sold your home, and have received the sales proceeds from the buyer, you have to make a full refund (principal and CPF accrued interest) to your account.
However, there is another way to pay back CPF housing loan.
This is called a voluntary CPF housing refund.
With a voluntary CPF housing refund, you can repay your CPF used for housing without waiting to sell your home.
In other words, while you still own your home, you are making voluntary refunds to your CPF account.
This has tons of benefits, including savings on interest payments, less stress, and much more. Let’s look at the benefits in detail below.
Why You Should Make A Voluntary Refund
The number of people making CPF voluntary housing refunds has been increasing of late, especially since the pandemic.
If you have made withdrawals from your CPF towards housing, here’s why you should consider making a voluntary refund.
Save On Interest Payments
As you know, the interest on your CPF withdrawal for housing is compounded at 2.5% per annum until you make the refund. This interest rate is higher than what banks would charge for housing loans.
This means the more you delay paying your CPF housing loan, the more interest you accrue that you will eventually have to pay.
However, when your money is in your CPF, you earn a 2.5% interest rate paid to you by the government.
This rate is higher for your Special Account, MediSave account and Retirement Account.
Simply put, when it comes to high-interest payments, it’s better to be on the receiving end instead of the giving end.
Less Stress When You Sell Your Property
When you sell your property, you’re required to repay your CPF after settling your existing home loan, if any.
For most people, once they sell a home, they are likely going to purchase a new home.
The downpayment for your new home is usually financed from the sales proceeds of your old home.
But now, you also have to pay your CPF housing loan back.
This can make you stressed out as you have to take out an additional loan to fund your downpayment.
Certainty Of Funds When Financing A New Home
If you pay back your CPF housing loan voluntarily, you can be certain of more cash after your sales proceeds, which can go into financing your new home.
In addition, if you have a shortfall in your sales proceeds and need funds, you can withdraw again from your CPF to fund your new housing – especially if you’re below 55 years old.
Most people think you can’t withdraw from your CPF OA once you make your refund. This is not true.
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How Much Voluntary Housing Refund To Make
The benefits of CPF voluntary refunds seem appealing.
But now you’re probably wondering how much refund you can make, seeing that you have daily expenses to settle and other outstanding loans, if any.
When it comes to CPF housing refunds, you can make refunds capped at the principal withdrawn plus accrued interest.
How you want to make this refund is up to you.
You can choose to pay it out in a lump sum, plan your finances in such a way that you can pay it off monthly, or pay when you have spare funds available.
Would A Voluntary CPF Housing Refund Be Suitable For Me?
While there are strong benefits to paying back your CPF housing loan, it might not be suitable for everyone, depending on their unique circumstances.
If you have spare cash lying around, it’s recommended you actually pay back your housing loan as the interest you accrue on it may be higher than that of banks.
But if any of the following situations apply to you, a voluntary refund might not be suitable.
Limited Cash
If you have insufficient funds after meeting your daily expenses and other loans, it may be unwise to refund your CPF housing loan at this point.
A voluntary refund will work better for those who have extra cash on hand or are saving towards the refund.
Tax Relief
When you make the normal voluntary CPF contributions, you can qualify for task relief. However, a CPF voluntary housing refund doesn’t qualify you for tax relief.
If you’re looking to qualify for tax relief, a voluntary housing refund might not be the best option.
You Do Not Wish To Sell Your Home
If you don’t wish to sell your home and want to leave it as an inheritance for your children for instance, there may be no need for an immediate refund to your CPF account.
You Are Over 55
While you can still make a CPF housing refund after the age of 55, the refunds go first into your Retirement Account in order to meet the Full Retirement Sum (FRS).
The FRS provides you with monthly payments when you reach retirement.
The extra voluntary housing refunds will go to your OA or Special Account once the full retirement sum has been met.
You Want To Make Investments
If you’re looking into making investments with the cash you have on hand, and the returns from your investment will be higher than the 2.5% interest rate you will get, there may be no urgency to refund your CPF housing loan immediately.
How To Make A Voluntary Refund
If you’re considering how to pay CPF housing loans voluntarily, you can do so by logging into your CPF portal using your Singpass.
Next, go to my Requests, click on Property, and click on Make a Housing Refund With Cash.
You can then proceed to make payment by selecting the PayNow or eNETS payment method.
Keep in mind if you have a withdrawal limit set to your PayNow or eNETS, you won’t be able to make payments above that amount. To make higher payments, you’ll have to increase your limit.
Refunds made through OCBC PayAnyone or PayNow using a QR code are immediately visible in your transaction history.
By the next working day of the payment date, the eNETS refunds made will appear in your transaction history.
A CPF Housing Loan Refund Has Its Benefits
Now that you know how to pay back CPF housing loan, as well as the pros and cons of doing so, you can decide what is your best course of action.
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Frequently Asked Questions
I Am Not Selling My Property Now. Can I Still Make Refunds To My CPF Account?
Yes, you can make voluntary CPF housing refunds. Log into your CPF portal with your Singpass to make your refund.
What If I Sell My Property And The Sales Proceeds Are Not Enough To Repay My CPF?
If you have a shortage of cash after the sale of your home, you’re not mandated to pay your CPF housing loan with cash.
However, note that you still have to pay your loan, as this will be needed to meet your Full Retirement Sum.
How Much Voluntary Housing Refund Am I Expected To Make?
You can max a refund that is capped at the full principal withdrawn, plus the accrued interest.
Can I Still Pay Back My CPF Housing Loan Once I Am Over 55?
If you are 55 and older, you can still make a voluntary housing refund. The money will be used to meet your Full Retirement Sum first.
Once this has been met, the extra will be added to your Ordinary and/or Special Account.
Do I Still Need To Pay For My CPF Housing Loan From My Sales Proceeds, Even When I Have Made A Voluntary Refund?
If you have paid all the due amounts for your CPF voluntarily, you don’t need to make another payment from your sales proceeds.
However, if you haven’t paid the full amount by the time you are selling your home, you’re required to refund the balance after the sale.
