How to Balance the Use of CPF for Property and Save Up for Retirement

Home loans can be a hard journey to navigate and most young couples typically choose to use their CPF to make up for what seems like a large sum of money. However, they might fall into the same trap of having to pay back the amount used when they decide to sell their home, plus the accrued interest.  In this scenario, most people find themselves stuck in a situation despite being relatively high-income earners. 

In this guide, we balance the benefits of parting with your cash over using your CPF and how this can help you retire early. 


Try to Use Cash Over CPF For Your Downpayment 

Why? Most first-time homeowners who decide to BTO do not have to worry about a withdrawal limit when it comes to utilising their CPF. However, when it comes the time to upgrade their flat, the amount they have to return to CPF upon sale of flat can be fairly large when combined with the interest payable, depending on how good the couple has been at saving. It is at this juncture that people feel lost with a large new housing loan and looming CPF repayments.  

The main reason why people forego using their CPF is that the automated payment system contributes to the feeling we know as “ignorance is bliss”. This frees up their savings instead for other luxuries, like car loan repayments or holidays. 

While we do not necessarily recommend using a full cash downpayment either, depending on your current retirement plan, it will be useful to use PropertyGuru’s Mortgage Affordability Calculator to understand how to split the entire loan into cash, CPF and other funds accordingly. 




Maximising your CPF’s Risk-free Returns 

There are very few investments that can guarantee a consistent interest rate of 5%, or even 3.5%. However, you do get 3.5% on the first 20K in your CPF Ordinary Account (OA), and up to 5% if you transfer funds into the Special Account (SA). 

While there might be some hesitation to do so, for those who are not investment savvy or don’t have a lot of cash savings, this is a good way to ensure that your retirement fund grows at a steady rate. In the best situations, the compounding interest may even accumulate enough to enable you to retire before age 65. 

If you prefer to use your cash to invest in liquid assets such as stocks, you might think about using your CPF to contribute to your HDB or private property downpayments and repayments. However, you must remember that you could end up paying more in the long run. 


Paying Cash Now Can Help You Save for Retirement Later

Since the savings in your CPF OA or SA accrues interest at a rate of 3.5% to 5% (depending on which account you decide to put your money in) you can actually end up with more “cash” on hand when you retire. 

Suppose a couple decides to upscale their HDB flat in 10 years or so to opt for a private property. Their repayment of CPF will include both the Principal Amount and the accrued interest. Assuming the principal amount is $100,000 and a couple sells after 10 years, with an interest rate of 1.025%, their total repayment will stand at $110,250. 

Compare this to a couple who chose to pay in cash initially and transfer their CPF OA earnings to their SA. In 10 years, they would have earned $39,750quite a different situation from the previous scenario.

However, suppose we take a couple who is not “cash rich” but has opted instead for a bank loan. In the current market situation, they can take advantage of near-zero interest rates for at least the first 10 years of their loan. In this way, they will still have more net savings as opposed to the couple who used their CPF initially. 


What are the Limits of Using my CPF for a Private Property?

Under the Central Provident Fund Board’s Private Properties Scheme (PPS), you can use your OA savings to fund your purchase of your private property. However, it can only be used for the following; 

  • Purchase price of property
  • Down payment/Monthly Housing loan repayments
  • Down payment/Monthly Construction loan repayments
  • Costs incurred such as ABSD, legal etc on purchase of private property 


How are the Rules Different for Using CPF on a Second Property?

An investment property in Singapore makes sense and has become a popular option for mid-life folk looking to retire with income coming in. However, the CPF rules for funding a second property are vastly different. 

First, we have to take into account the ABSD or Additional Buyer Stamp Duty. For Singaporeans it stands at 12% while for PRs it is 15%. For a detailed breakdown view the table below. 

Buyer profile 

ABSD payable 

Singapore Citizen buying first property 

No need to pay ABSD

Singapore Citizen buying second property 


Singapore Citizen buying third and subsequent properties 


Singapore Permanent Resident (PR) buying first property 


Singapore Permanent Resident (PR) buying second and subsequent properties 


Foreigner buying any property 


Entities (company or association) buying any property 

25% (additional 5% if entity is housing developer) 


Secondly, assuming you’re still financing a mortgage for your first home, the Loan-to-Value (LTV) limit for your second property is reduced as well. Here’s a look at the LTV limits


1st housing loan

2nd housing loan

3rd and subsequent housing loans 

LTV limit 

Up to 75%

Up to 45% 

Up to 35% 

Minimum cash downpayment 





A second property means that your downpayment is increased to up to 55% and you are only allowed to use your CPF to pay off half of the remaining amount, or up to 30%. This amount however is capped at 120% of your Valuation Limit on your second property. 

Related article: Can You Truly Afford a Second Property Investment in Singapore?

The above first assumes that you have set aside a BRS or Basic Retirement Sum ($93,000 as of 2021) in your SA prior to making this investment. If said property is a private property, you will have to take into account your age as well as the remaining lease on the property. This will be measured as a percentage against the Valuation Limit, or against the following equation:

(Remaining lease of property when the youngest eligible owner using CPF is 55 years old) / (Lease of the property at point of purchase) x (Lower of purchase price or value of the property). 


As Such, We Recommend You Only Use Your CPF When…

  1. You do not have a solid savings scheme and need the money for a rainy day. Cash is best for getting out of a hard situation and banks do look at the amount of money you have saved in order to gain a good credit score in case of retrenchment, accidents or deaths. 
  2. You are unable to manage your cash wisely. 
  3. You intend to use the cash for better investments such as properties abroad, investment opportunities or have ample stocks on-hand

If you are unsure about when to use your CPF, and how much, for your property purchases, you can always seek help from our Home Finance Advisors at PropertyGuru Financewe’ll help you assess your situation and advise you on how to maximise your returns between CPF and cash payments, and more. 


PropertyGuru Finance home loan bottom banner

Disclaimer: Information provided on this website is general in nature and does not constitute financial advice.

PropertyGuru will endeavour to update the website as needed. However, information can change without notice and we do not guarantee the accuracy of information on the website, including information provided by third parties, at any particular time.Whilst every effort has been made to ensure that the information provided is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial planner or your bank to take into account your particular financial situation and individual needs.PropertyGuru does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this website. Except insofar as any liability under statute cannot be excluded, PropertyGuru, its employees do not accept any liability for any error or omission on this web site or for any resulting loss or damage suffered by the recipient or any other person. 

Compare listings