You will be able to explain how the valuation limit, the withdrawal limit and the remaining lease each cap the CPF you can use.
When people plan a home purchase, they often check their Ordinary Account balance and treat that figure as the CPF they can spend. The real figure can be lower. Three separate caps apply on top of your OA balance: the valuation limit, the withdrawal limit, and a rule tied to the remaining lease. Any one of them can shrink the CPF available for a given property, and the shortfall has to be paid in cash.
Take Kelvin and Mei, who are buying together. They liked two flats a few blocks apart in the same estate. The lower-priced one had a bigger kitchen. The pricier one had about ten more years remaining on its lease. Kelvin's view was that the cheaper flat was the better deal. Then a friend asked whether CPF would stretch as far on the cheaper flat, and that was the question they needed to answer.
The valuation limit caps the CPF you may put into a property. It equals whichever is lower: the price you paid, or the valuation done when you bought. Suppose Kelvin and Mei paid S$520,000 for a flat valued at S$510,000 (both invented figures). Their valuation limit would then be S$510,000.
CPF savings are meant for retirement, so the rules stop them from funding more than an independent valuer says the home is worth. Lesson 2.1 explained that cash-over-valuation has to be paid in cash, and that rule rests on the same reasoning.
CPF used for the downpayment and for each instalment paid from CPF is counted against the limit. CPF used for stamp duty, legal fees and upgrading costs is not counted towards the CPF housing limit. The count combines both buyers, so whatever comes out of Kelvin's account and whatever comes out of Mei's account go towards one shared S$510,000.
Most owners are nowhere near the valuation limit during the first decade they own the home. You are more likely to reach it with a long loan, since CPF-paid instalments build up year after year, or if you used a large amount of CPF for the downpayment.
Reaching the valuation limit does not always end your CPF use. A second, higher ceiling, the withdrawal limit, sits above it, and you may be allowed to carry on using CPF up to that point. To qualify, you need to have already set aside enough in your CPF accounts for retirement, judged against the current Basic Retirement Sum.
A gate is a handy way to hold the three zones in mind. Up to the valuation limit, the gate stands open for everyone. From the valuation limit up to the withdrawal limit, it opens only for members who already have their retirement savings in place. Past the withdrawal limit, it stays closed, and you pay every remaining loan instalment in cash.
Not every purchase falls under these two limits. They cover private property and HDB flats bought with a bank loan. A new flat bought directly from HDB with an HDB loan has no such cap: you and any co-owners may use your OA savings for the full purchase price, including the housing loan. A resale HDB flat with an HDB loan is still capped at the valuation limit, but once you have set aside your Basic Retirement Sum, you can keep using OA savings for the remaining loan instead of stopping at a withdrawal limit. To find out which rules cover your purchase and loan, read the CPF Board's housing pages, plus your HDB Flat Eligibility letter if you are buying HDB. Do this before you sign, since it affects how many years CPF can keep paying your instalments.
HDB flats and most private homes are leasehold. Retirement savings are poorly placed in a home whose lease may end while the owner is still alive, so the CPF rules ask whether the remaining lease will last until the youngest buyer reaches an age the CPF Board sets.
There are three outcomes. When the lease reaches that age, you can use CPF up to the valuation limit, with the withdrawal limit still applying. When it falls short, the CPF you can use is pro-rated, cut down in proportion to the shortfall. When the remaining lease is below a set minimum, CPF cannot be used on the property.
Both the age and the minimum lease are published by the CPF Board, and both have changed in the past. Check the current figures yourself, because a number a relative used when they bought may no longer hold.
In Kelvin and Mei's case, Mei is the younger buyer at 30, so the lease is measured against her. The cheaper flat had roughly 60 years remaining, enough to take her to age 90. The dearer flat had roughly 70 years, taking her to age 100. They did not know what age the CPF Board currently uses, so they checked. On the flat whose lease did not reach that age, the calculator gave a smaller CPF amount, leaving more of the price to be paid in cash or through a loan repaid in cash.
Older leases also limit what banks and HDB will lend, which is a separate issue from the CPF caps. Lesson 7.2, "Lease decay: what a shrinking lease does", in the course "Property & Mortgages: buy a home and manage the loan", deals with the lending side.
Working out a pro-rated amount by hand is possible, but the CPF Board's housing calculator on cpf.gov.sg does the arithmetic with the current figures already built in. Once it is open, you fill in:
purchase price valuation, if one has been done remaining lease age of each buyer
It returns the maximum CPF you could use on that property.
When Kelvin and Mei put both flats through it, the cheaper one lost its advantage. Its lower price came with a lower CPF cap, so over the years they would pay more out of pocket. They switched to comparing the flats by the total cash each would require, and that is the comparison to make for any homes you are weighing, rather than price alone.
Pick a flat you might buy, real or from a listing, and note its remaining lease and asking price. Then find your age and the age of anyone you would buy with, and open the CPF housing calculator on cpf.gov.sg.
Open the CPF Board's housing calculator. Enter your age and a flat's remaining lease, and note how much CPF you could use.
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