How To Pay Back Your CPF Housing Loan

December 6, 2022

As a Singaporean, chances are that you used your CPF Ordinary Account (OA) savings to buy a home. But did you know you can also pay off your mortgage years before you reach retirement age?

You may have heard that you should refund your CPF by reinvesting your housing-related withdrawals.

Whether you used your CPF to buy a HDB flat or private property in Singapore, the money in your OA can be used to cover the downpayment, as well as your monthly mortgage payments. After all, all the OA money you spend and any accrued interest will be “owed” to your CPF account.

So find out how to pay back CPF housing loan in this article.

Why You Should Make A Voluntary Refund

You might want to sell your home at some point in the future and upgrade to a bigger property to have more space to live comfortably.

Or perhaps you are looking to capitalise on the booming second-hand apartment market. No matter your reason for selling your current property, the CPF must be returned in full, along with any accrued interest.

So how does making a voluntary refund help you with all these needs?

It Settles Outstanding Interest

Interest is accrued annually when you withdraw money from your CPF for your housing loan. Consequently, the longer the funds remain in the account, the more interest they will accrue. This means that the longer you take to pay back the original amount of your CPF loan, the more interest you’ll have to deal with. Therefore, the total amount you need to repay will increase the longer you take.

For example, you’ve lived in your home for 10 years and have decided to sell it. This means you’ll need to repay the original amount you used, plus 10 years’ worth of interest.

Making a voluntary refund from time to time will save you the hassle of paying the CPF accrued interest over the years.

Acts As Financial Security

A CPF housing refund may be a good option if you have savings that you haven’t set up for investments. That’s if you believe your savings can give you a greater return than the CPF OA interest rate, which is currently 2.5%.

Make sure you don’t need the money before proceeding with the housing refund through CPF.

You should have an emergency fund that can cover at least a few months of living expenses. Also, pay off any high-interest debt, such as credit card bills.

Before you make the refund, don’t make major purchases such as a vehicle. In other words, don’t apply for a CPF housing refund unless you are sure that you won’t require the funds for any reason in the future.

You Can Use It For Other Commitments

When you have made your CPF Voluntary Housing Refund, you can use it in any other CPF-approved schemes, including:

A retirement savings account for use during retirement
Healthcare costs for hospital stays, outpatient care, etc

However, you may have to pay legal expenses to spend your restored CPF OA funds on the same property. This only applies if a total voluntary housing return has already been paid on the property.

In addition, your CPF funds will continue to accrue interest. Hence, housing allowances are a great way to put money toward your CPF retirement account.

How Much Voluntary Housing Refund Should You Make?

With the CPF interest rate at 2.5%, settling your refund early is a prudent financial move. Bank deposit interest rates currently hover at about 0.5% annually.

Even worse, financial institutions earn five times as much money from CPF interest. In that case, refunding your CPF housing loan is preferable to putting cash in low-yield bank accounts to pay off your mortgage. It also saves you a lot more money compared to just dealing with a normal CPF housing loan.

This can be a very unusual circumstance for those under 55 years old with a Special Account who have already reached the Full Retirement Sum (FRS). Unfortunately, the Retirement Sum Topping Up (RSTU) Scheme will not be able to contribute to their Special Account in this case.

The CPF Voluntary Housing Refund allows you to increase your CPF contributions without affecting your guaranteed annual return of 2.5%.

You also have the option of making Voluntary Payments (VCs) each year, with a maximum annual contribution of $37,740.

Those who are over 55 years old should be able to use the RSTU up to the Enhanced Retirement Sum (ERS). For this, expect an annual return of 4% and tax savings of about $2,000.

However, a CPF house refund after the age of 55 will go toward your FRS first. If you don’t meet the FRS, your OA won’t receive any of your Voluntary Housing Refunds.

In addition, those who are just about to turn 55 will find themselves in a unique position. If at this point, the FRS is already in their Special Account (SA), they can convert their cash savings into SA funds. That way, they can continue withdrawing funds like an ATM.

After all, your savings would only be earning a pittance in interest in a regular bank account. Those who have turned 55 can direct their Voluntary Housing Refunds to their Retirement Accounts.

How To Make A Voluntary Refund

So now you know why a CPF voluntary housing refund is a good idea. So how much voluntary housing refund should you make?

The first step is to know how much you owe.If you have used part of your CPF OA savings for a property downpayment, that withdrawn sum is another loan.

Basically, you owe the CPF the sum you took out, plus any accrued interest.

To check how much your debt is, follow these steps:

Log into your CPF.
Click the Home Ownership Dashboard.
Check the total principal amount drawn.
Check the total accrued interest.

For CPF accrued interest, you do not need to repay this interest before selling your property, but the interest will increase yearly at a 2.5% rate until you refund the money.

Note also that repaying your CPF OA debt is not the same as repaying your home loan and vice versa.

So how much should you refund? There is no set answer, but you should refund an amount you can handle. There is no minimum limit – the maximum limit is the amount you owe plus accrued interest. Remember to set aside some savings in case of rainy days.

There are two ways you can make a voluntary refund:

Via The CPF Website

Open the CPF voluntary housing refund online form.
Read and accept the disclaimer, then click start.
You will be prompted to use your Singpass to log in. Do so following the instructions.
Choose a payment method.
Choose your property.
Enter the refund sum you are willing to pay.
Make sure you agree to the declaration before hitting the confirmation button.
Finish the payment.

Via The CPF Mobile App

Log into this app using your Singpass details.
Click on “services”.
Go to “Voluntary Housing Refund”.
Choose “Continue”.
Choose the desired property.
Write the amount you want to refund.
Choose “Next” to see the agreement.
Tap “Yes” to continue.
Choose the payment method.
Finalise the process.

How Much Voluntary Refund Can You Make?

You can make a voluntary refund to pay back as much or as little of the loan as you like. But that’s only up to the entire principal and interest amount you borrowed to purchase the property. Any exceeding amount is returned to your OA.

When the sale of a home is finalised, the proceeds must be redeposited into your CPF account along with any accrued interest. That includes all CPF housing grants.

You can return this money without waiting until your home is sold by making a voluntary CPF housing refund.

This has become a popular option after the pandemic.

Any housing reimbursements you receive if you are younger than 55 years old will be deposited into your CPF OA.

Things only change if you’re 55 or older. In this case, your FRS share will be automatically deducted from any voluntary housing return you make, then be deposited into your CPF Retirement Account (RA).

Find Out How To Pay Back CPF Housing Loan

If you cashed out your CPF by selling your property, you have to repay the principal plus interest. The CPF Voluntary Housing Refund can improve your chances of buying a property in the future with some planning.

There’s more than one way in which you can use your CPF refunds. In the long run, you won’t have to worry about monthly or annual interest rates based on your housing loan.

If you need a loan for any housing-related need such as a downpayment, contact GS Credit. We are a licensed moneylender that offers flexible terms and easy repayment.