You will be able to split a downpayment into a cash portion and a CPF portion.
Get out the list of upfront costs you made in Lesson 4.1, Everything you pay before you collect the keys, and mark each line "cash" or "CPF". Whether a cost can come from CPF depends on three things: what the cost is, when it is due, and what kind of loan you take. The lines marked cash are your cash portion, and they go into your goals sheet because nobody else is saving that money for you. The lines marked CPF are your CPF portion, the costs that can be paid from your CPF Ordinary Account.
Mei and Daniel are a couple buying a home, and they expect to take an HDB loan. When Daniel first saw their list from Lesson 4.1, he was relieved and said most of it comes out of CPF anyway. Mei was less sure, because a colleague of hers had complained about needing tens of thousands in cash for a condo even with a healthy CPF balance. They are both partly right, and sorting the list shows which costs fall on which side.
The 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 after that the monthly loan instalments. The general rules on CPF use are in The Singapore personal finance system, lesson 5.2, What CPF can and cannot be used for.
CPF Board sets how much of your Ordinary Account can go towards a property, and that limit can depend on the remaining lease and on your age. The money also has to be in the account already when a payment falls due, so a balance you expect to have next year cannot pay a bill due this year. Check the current rules on the CPF Board website and look up your actual balance there rather than estimating it.
Some payments come before CPF can be used, and some are things CPF does not pay for at all. Early payments to secure a home are usually cash, so mark these lines cash first:
the option fee for a new HDB flat, paid at booking the option fee for a resale flat or private property, and, depending on the purchase, the exercise fee cash over valuation (COV) on a resale flat, which is cash only renovation, furniture and moving, which Lesson 4.1 noted are always cash
The type of loan has the biggest effect on your cash portion. With an HDB loan, the downpayment can generally be paid from CPF, cash or a mix, as long as the Ordinary Account holds enough when each payment is due, and many buyers of new flats pay most of their downpayment from CPF.
With a bank loan, MAS rules require part of the downpayment to be paid in cash, with CPF covering the rest. This applies no matter how large your CPF balance is, which is why Mei's colleague, who bought the condo with a bank loan, had to find tens of thousands in cash. A bank loan also changes the split compared with an HDB loan in other ways.
How much a bank or HDB may lend as a share of the price has changed several times over the years, so don't plan from a percentage you remember. Look up the current loan limits and minimum cash downpayment for bank loans on the MAS website, HDB loan terms on the HDB website, and CPF usage rules on the CPF Board website, and use your HFE letter for the HDB loan figure in your own case.
With the cash items marked and your loan type checked, assign the remaining downpayment, stamp duty and legal fees to CPF where the rules allow, then add up each side to get your cash portion and your CPF portion.
Their list uses the same made-up figures as Lesson 4.1. The S$2,000 option fee is cash. The S$19,000 due at lease signing, S$7,000 in stamp duty and fees, and S$59,000 due at key collection come from their Ordinary Accounts. Renovation at S$25,000 and furniture and moving at S$5,000 are cash.
Their cash portion is S$2,000 + S$25,000 + S$5,000 = S$32,000, and their CPF portion is S$19,000 + S$7,000 + S$59,000 = S$85,000.
You don't save for the CPF portion directly, since contributions go in automatically, but you do need to check that the money will be there. Mei and Daniel have S$40,000 in their Ordinary Accounts combined today, and their CPF statements show about S$1,100 a month going into both accounts together (an example figure), and they ignore interest to keep the estimate cautious.
On their timeline, lease signing is at month 9, when their balance will be about S$49,900 (S$40,000 + 9 x S$1,100). The S$26,000 due then (S$19,000 + S$7,000) is covered by that balance.
That payment leaves S$23,900. Key collection is at month 57, which is 48 months later, and 48 x S$1,100 adds S$52,800, bringing the balance back to about S$76,700, enough for the S$59,000 due at key collection.
If your balance would fall short at any due date, the shortfall moves into the cash portion and you pay it in cash. To run the check yourself, take your current Ordinary Account balance from the CPF Board website, add your monthly contributions from your CPF statements, leave out interest, and compare the total with what is due on each date.
Enter the cash portion in your goals sheet as a dated goal. It is usually a fixed goal as well, because HDB, the seller or the bank sets the payment dates.
Loan type can change this goal by a lot. Suppose Mei and Daniel bought a resale flat with a bank loan instead, the rules required S$20,000 of the downpayment in cash, including the option fee, and the seller wanted S$10,000 cash over valuation. Their cash portion would rise from S$32,000 to S$60,000 (S$20,000 + S$10,000 + S$25,000 + S$5,000) before any change in price, almost twice the cash goal for the same couple with the same CPF.
Using CPF for your home also has a cost to your retirement, which Lesson 4.3, The trade-off of using CPF for your home, works through.
For the activity, you'll need the current figures from HDB, MAS and CPF Board open before you split your own downpayment.
Look up the current figures from HDB, MAS and CPF Board, then split your expected downpayment into a cash portion and a CPF portion.
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