askST: Can I use the balance in my Ordinary Account to redeem my housing loan?

Reader Yip Chih Kiong, who is planning to redeem his housing loan with a bank, wrote to askST to ask if he could use the balance in his ordinary account in his CPF to do so.

Invest editor Lorna Tan answered.

The following information only applies to properties with 60 years of remaining lease or more.

A CPF member can use his Ordinary Account (OA) to redeem the bank loan, but his use of OA is subject to the following CPF Housing Limits.

The Valuation Limit (VL) is the lower of the purchase price or the market value of a property at the time of purchase. For example, if a property is valued at $550,000 and the purchase price is $580,000, the VL would be $550,000. You can use your OA for your downpayment and to service your home loan up to the VL.

The Withdrawal Limit (WL) is the maximum amount of CPF savings that can be used for a property. It applies to properties bought with a bank loan. Currently, the WL is set at 120 per cent of the VL. For example, if a property has a VL of $500,000, the WL would be $600,000. You cannot use your OA once the total OA used by all owners for the property reaches the WL.

What happens when you reach the VL or WL?

When you reach your VL: If you are below the age of 55, you can continue to use your OA to make your home loan repayments if you can set aside the latest Basic Retirement Sum (BRS). This is $80,500 currently.

You can count the funds in your Special Account (SA) and the amount of SA used under the Investment Scheme towards the BRS.

If you are above the age of 55, you can only use any excess from your OA after setting aside your BRS. Your BRS depends on when you turn 55.

When you reach your WL: You cannot use any more of your OA savings for your home loan. If your home loan is still outstanding, you would need to pay using cash.

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