How To Adjust Your CPF Payment For Your Housing Loan
Why is it important to adjust your CPF payment for your housing loan? How can doing so affect you financially? Let’s see how to pay for your home loan through CPF.
As you probably know, you can use your CPF to pay for your HDB flat.
However, it may come as a surprise to learn that you can use your CPF to pay for your housing and mortgage loans from banks as well. Interesting, right?
Most of Singapore’s young working population dream of becoming property owners one day.
Many of them accomplish this with the support of CPF, other government-backed programmes, and private housing loans.
However, some have difficulty keeping up with their mortgage payments after the pandemic’s aftermath disrupted their finances.
Though it’s a noble aspiration to own one’s own home, you must take some steps to ensure all goes well.
How Do You Use Your CPF To Pay Your Monthly Installments?
Besides hard cash, funds from your CPF Ordinary Account (OA) can also be used to pay off your mortgage.
You can also use the CPF to pay in monthly installments.
The CPF Home Protection Scheme is mandatory if you intend to utilise your CPF savings for your HDB loan repayment.
This applies for the following:
- HDB new/BTO mortgage
- HDB mortgages (resale)
- A bank loan for your HDB unit
- A loan from a bank secured by personal property
Withdrawals used to pay monthly CPF mortgage payments are subject to either the valuation limit or the withdrawal limit, depending on the property type purchased.
The valuation limit is the difference between the purchase price and your property’s current market value.
Based on the determined percentages, you can specify the monthly amounts that you’ll be paying.
You can do this in a few easy steps:
- Use your Singpass to enter the CPF website.
- Click on “My request”.
- Select “Use CPF for my property” from the Property drop-down menu.
- Choose property details.
- Repeat Payment Calculation by clicking the button.
- You can now adjust both the monthly payment amount and its starting date.
- Submit your request.
How To Adjust Your Monthly CPF Deductionsyou’re your Housing Loan
The process of how you can adjust your CPF payment for a housing loan is straightforward. Here are the steps you need to follow:
1. Proceed To Log In To Your CPF Account
To access your CPF account, visit the CPF website and select “Login” from the menu bar. You can use Singpass to log in in two ways: by scanning the QR code with your phone or manually entering your Singpass password.
2. See The Info About Home Ownership
You will be directed to your own individual portal when you log in successfully.
To access the Homeownership option, hover your mouse over MyCPF on the left side of the screen. Your address will be displayed on the following page.
3. Read And Comply With The On-screen Prompts
The HDB website will prompt you to modify your CPF housing loan repayment if your property is a HDB flat.
Navigate to the appropriate edit page by clicking the appropriate link.
Follow the on-screen prompts for more info and submit your adjustments if your home is a private property.
4. Confirm The Changes, And Then Hit “Send”
After making the required modifications, double-check your work before clicking the “Submit” button.
Read the fine print and any other relevant information before proceeding.
As an added safety measure, you may wish to either print or save a copy of your transaction for future reference.
Why You Should Make Changes To Your CPF Housing Payments
Now that you know how to adjust your CPF payment for a housing loan, you may be wondering why you need to do this in the first place.
Here are three typical examples of when you should consider making adjustments to your CPF payments:
1. You Wish To Retain More Of Your CPF Savings For Retirement
Your CPF Regular Account and Special Account will merge to become your Retirement Account when you reach the age of 55.
You can join the CPF LIFE national annuity plan with the money in your Retirement Account. This is the money you can count on to be there for you every month once you retire.
The larger your Retirement Account balance, the larger your CPF LIFE payout will be.
So if you want to enjoy a pleasant retirement, you might have to limit the amount of money you withdraw from your CPF Ordinary Account.
2. Alterations To CPF Contributions After The Age Of 35
When you turn 35, a more significant portion of your CPF payments will be allocated to the Special Account and MediSave Account.
On the other hand, less funds will be allocated to the Ordinary Account.
Because of this, the funds in your Ordinary Account might not be sufficient to pay for your HDB monthly installments in full.
Consider reducing your CPF deductions and making up the shortfall in cash. Your mortgage lender may charge you late penalties or other costs if you don’t.
3. Your CPF Ordinary Account Doesn’t Have Enough Money
If you do not have enough money in your CPF Ordinary Account, you will need to come up with other ways of repaying your home loan.
Instead of waiting for the system to notify you, you might as well make the transition now that you know how it is done.
4. You May Become Sick Or Unable To Work
You can put up to $20,000 in your Ordinary Account as a buffer if you lose your job or fall very ill while still having to make mortgage payments.
This strategy can safeguard your retirement funds without jeopardising your ability to keep up with your CPF mortgage payments.
You can use the CPF housing usage calculator to determine your housing allowance and any restrictions that may be imposed before you commit to purchasing a home.
If anything drastic happens to your finances that you weren’t expecting, this can help you determine how much money you will have available.
Legal Representation For CPF And Housing Loans
Before you can use your CPF money to pay for a home, you have to hire a law firm to act on your behalf.
Your attorney will submit a request to the CPF Board on your behalf to access your CPF funds.
This is called conveyancing, a professional service that costs money.
Experts encourage you to look around and obtain different quotations to determine how much your property’s conveyancing fees would cost.
However, if you buy a private home, you must hire your own conveyancing attorney.
Adjust Your CPF Payments Before You Are Caught Offguard
And there we have it, a summary of why you ought to adjust your CPF payment when paying for a HDB loan.
Although it may limit your total retirement amount, at the end of the day, you will have made your home ownership easier rather than just relying on cash.
If you need more clarification or assistance concerning home loans and CPF, head over to Horison Credit, one of Singapore’s best licensed money lenders.