You will be able to split a downpayment into the cash portion and the CPF portion.
Daniel's first reaction to the list in lesson 4.1 was relief. "Most of this comes out of CPF anyway," he said. Mei wasn't sure. She had heard a colleague complain that she had to find tens of thousands in cash for her condo even with a healthy CPF balance. They were both partly right. Whether a cost can come from CPF depends on what the cost is, when it is due, and what kind of loan you take.
This lesson sorts the upfront costs into the cash portion and the CPF portion. The cash portion is the one that belongs in your goals sheet, because nobody else is saving it for you.
Your CPF Ordinary Account can be used for housing. For a home bought with a loan, it can usually pay much of the downpayment, the stamp duty and the legal fees, and then the monthly loan instalments. The Singapore personal finance system, lesson 5.2, What CPF can and cannot be used for, covered the general rules.
There are limits. CPF Board sets how much of your Ordinary Account can go towards a property, and that can depend on the remaining lease and on your age. The money also has to be in the account when the payment is due, so a balance you will have in three years can't pay a bill due next year. Check the current rules on the CPF Board website, and look at your own balance there rather than estimating it.
Some payments come before CPF can be used, or are not things CPF pays for at all.
Early payments to secure the home are usually cash. For a new HDB flat, that is the option fee when you book. For a resale flat or a private property, the option fee is paid in cash, and depending on the purchase, the exercise fee may need to be too. For a resale flat, any cash over valuation from lesson 4.1, Everything you pay before you collect the keys, is cash only.
Renovation, furniture and moving are always cash, as lesson 4.1 noted.
The type of loan has the biggest effect on the cash portion.
With an HDB loan, the downpayment can generally be paid from CPF, in cash, or a mix, as long as the Ordinary Account has enough in it when each payment is due. Many buyers of new flats pay most of the downpayment from CPF.
With a bank loan, MAS rules require part of the downpayment to be paid in cash. CPF can pay the rest. This is why the colleague with the condo needed so much cash: the rule applies however large her CPF balance was. The split also differs from an HDB loan in other ways, and the rules on how much a bank or HDB may lend as a share of the price have changed several times over the years.
So don't plan from a percentage you remember. Before you plan, look up the current loan limits and the minimum cash downpayment for bank loans on the MAS website, the HDB loan terms on the HDB website, and the CPF usage rules on the CPF Board website. Your HFE letter gives the HDB loan figure for your own case.
Here is Mei and Daniel's list from lesson 4.1, with the same made-up figures. They expect to take an HDB loan.
The option fee of S$2,000 is cash. The S$19,000 due when they sign the lease, the S$7,000 of stamp duty and fees, and the S$59,000 at key collection can all come from their Ordinary Accounts, as long as the money is there. Renovation, S$25,000, and furniture and moving, S$5,000, are cash.
That puts S$32,000 in the cash portion and S$85,000 in the CPF portion.
They check the CPF side too. Their Ordinary Accounts hold S$40,000 together today. Their CPF statements show about S$1,100 a month going into their two Ordinary Accounts together, again an example figure. Ignoring interest to stay cautious, they will have about S$49,900 at the lease signing in month 9, enough for the S$26,000 due then. By month 57, when they collect the keys, the balance will have grown back to about S$76,700, enough for the S$59,000. If the CPF side had fallen short, the gap would have moved into the cash portion.
Now suppose instead they bought a resale flat with a bank loan. As an example with made-up figures, if the rules for that loan required S$20,000 of the downpayment in cash, including the option fee, and the seller wanted S$10,000 in cash over valuation, the cash portion would rise from S$32,000 to S$60,000 before any change in price. Same couple, same CPF, almost twice the cash goal.
The cash portion is a dated goal like any other, and usually a fixed one, because the payment dates are set by HDB, the seller or the bank. The CPF portion is not something you save for directly, since your contributions go in automatically, but it still needs checking: if the balance won't be there in time, cash has to cover the gap.
Lesson 4.3, The trade-off of using CPF for your home, looks at the other side of this, which is what using CPF costs your retirement. For the activity, you'll need the current figures from HDB, MAS and CPF Board open before you split your own downpayment.
Using current figures from HDB, MAS and CPF Board, split your expected downpayment into cash and CPF portions.
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