You will be able to list the costs OA savings can and cannot pay when buying a home.
Kelvin and Mei are getting married next year and have started viewing resale flats in Sengkang. The first agent they met told them, cheerfully, that "CPF covers almost everything." The second one asked how much cash they had set aside for the cash-over-valuation. They went home unsure which agent to believe.
Both were partly right. Your Ordinary Account can pay a large share of a home purchase, but it can't pay all of it, and some of the cash items land early, before CPF can be used at all. This lesson sorts the costs into the two piles.
The OA is the account the housing rules are written for. Within limits that the next lesson explains, OA savings can pay for:
the part of the downpayment that the loan rules allow to come from CPF the monthly loan instalments, for an HDB loan or a bank loan the Buyer's Stamp Duty on the purchase legal and conveyancing fees for the purchase premiums for the Home Protection Scheme, where it applies
Each owner pays from their own OA. When Kelvin and Mei buy together, each of them can use their own OA towards the purchase, and the CPF used is recorded against each of them separately. That matters later, because each of them will refund their own share with interest when the flat is sold, as lesson 2.3 shows.
If you qualify for a CPF housing grant, the grant is credited into your OA and used for the purchase, not paid to you in cash. Grants and eligibility are covered in Property & Mortgages: buy a home and manage the loan.
Some costs can never come from CPF, and some come before CPF can be used.
The option fee is the first. To secure a resale flat or a private property, you pay the seller a fee for the option to buy, and that fee is cash. For a resale flat there is often an exercise fee as well, also in cash.
Cash-over-valuation is the second, and usually the larger. CPF and the loan are both based on the lower of the price and the valuation. Anything you agree to pay above the valuation has to be cash. If Kelvin and Mei agree a price of S$520,000 for a flat valued at S$510,000, both example figures, the S$10,000 gap is theirs to pay in cash.
With a bank loan, the rules also require part of the downpayment in cash. The split differs from an HDB loan and is set by MAS and HDB, so check the current rule before planning. Big goals: wedding, home, car and kids covers this in lesson 4.2, Which parts must be cash and which CPF can pay.
Then come the costs that aren't part of the purchase at all: renovation, furniture, moving and any agent's commission. These all need cash, and they tend to land in the same few months as the purchase.
There is one more rule people often discover only at the signing table. If you use CPF to pay the monthly instalments on an HDB flat, you must be covered by the Home Protection Scheme, or HPS. It is a mortgage-reducing insurance run by the CPF Board. If an insured member dies or becomes permanently incapacitated before the loan is paid off, HPS pays off that member's share of the outstanding loan, so the family keeps the flat.
The premiums are paid from your OA, and the cover lasts until the loan is repaid or you reach an age set by the CPF Board. Private property loans are not covered by HPS. Owners of private homes usually look at mortgage-reducing insurance from an insurer instead, which Insurance Decoded discusses alongside other life cover.
With example figures, here is how their list came out.
In the OA pile: the CPF part of the downpayment, the stamp duty, the legal fees, the HPS premiums and, from the month they collect the keys, the monthly instalment.
In the cash pile: the option fee and exercise fee, the S$10,000 cash-over-valuation, the renovation they have priced at about S$45,000, furniture, and the movers.
The cash pile surprised them. They had been saving for a wedding and assumed the flat would come mostly from CPF. Seeing the two piles side by side showed them that the flat needed a cash fund of its own, with an early date on it. Downpayment planning as a savings goal is taught in Big goals: wedding, home, car and kids, module 4. This module stays with the CPF rules.
How much CPF you can actually use depends on the price, the valuation, the remaining lease and your age, and that is the subject of lesson 2.2, Valuation and withdrawal limits, and why older leases are capped. The CPF Board and HDB websites set out the current rules, and the HDB Flat Eligibility letter shows what loan and grants you may get.
Take a home purchase you are planning, or one you might plan in the next few years, and list every cost you can think of, from the option fee to the movers. Then sort each one into the OA pile or the cash pile.
List the costs of a home purchase you are planning or might plan, and mark which can be paid from your OA and which must be cash.
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