Everything About the Sudden New CPF Home Lease That S’poreans Should Know About

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One thing Singaporeans do is always complain that housing is too expensive.

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It is, honestly.

But for those of you who are planning to purchase a new HDB flat, good news!

The government has just dropped another new policy regarding HDB flats and your CPF funds, so I guess this might go a little bit easier on your bank account. YAY!

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If you’re curious about how this will affect your home purchasing decisions in future, read on. I promise I’ll make it as simple as possible.

Everyone’s Getting Older

It’s sad, but it’s the truth.

There are more now of us in Singapore who may be lucky enough to be blessed with longevity and live up to 100 years old, with the life expectancy rate increasing.

But what would happen if we happen to outlive the lease of our houses? We’d then have no place to live in for our last few glory years?

Simply put, your housing lease shouldn’t be up before your own time is up.

And the longer you live, the more retirement funds you need as well.

Therefore, in consideration of the above, new rules have been implemented to give Singaporeans more freedom in purchasing an HDB flat while making sure that our housing leases are long enough and that we still have enough retirement funds to go on.

New Rules

Unlike in the past, where the focus was always on the amount of remaining lease on an HDB flat, it has shifted to that of whether your house can last you throughout your whole life. The limitations of CPF usage have also become more flexible.

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Finally, you can use more of your CPF.

HDBs are sold with a 99-year lease.

For resell flats that are ageing and have little years left on its lease, buyers can now take out a bigger sum from their CPF and get more loans to pay for them. This is provided that the remaining years on the lease can last the youngest buyer until at least 95 years old.

A safety net for retirement

However, you still need enough funds in your CPF for retirement, so you can’t use too much of it to pay for housing. There must be at least 20 years of lease left on the flats before you’re able to use your CPF to pay for it.

If you’re above 55 years old, you’ll need to own a property where the remaining lease has to be at least 40 years, covering you until you are 95 years old. Or else, you can’t take out funds from your CPF in excess of your Basic Retirement Sum.

CPF Can Be Used For Resale Flats*

Yes, *asterisks mean T&C applies. Here’s the what.

The Ministry of National Development has been looking to “improve the liquidity of the resale market”, meaning that they want more people to buy and sell old flats that may not have many years left on its lease – barely anyone wants to buy a flat that’s going to expire soon.

With the new rules, older buyers who wish to use their CPF to purchase homes will now be able to do so, making it easier for aged flats to be sold and bought as they don’t need that long of a lease to hit the requirement of it lasting until they’re 95 as compared to younger buyers. Good for them!

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For example, if you’re 45 years old, you would be able to use your CPF to pay up to a 100% of the property’s valuation limit for a flat that has 50 years left of its lease, for it will cover you up to 95 years old. You’d also get a maximum HDB loan of 90%.

But for younger buyers…

Sadly, younger buyers would be affected if they purchase flats that are older, for many might wish to live in an older estate to be closer to their parents. This would mean that they are unable to fork out as much from their CPF.

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If you’re 25 years old, you can only use your CPF to pay up to 90% of the property price or valuation limit for a flat that has 65 years left of its lease as it will not cover you until you’re 95 years old. As compared to being able to get a maximum HDB loan of 100% in the past, you can only get 81% now.

So if you’re looking to be able to use your CPF funds to pay up to 100% of the property price or value of your new home, you need to ensure it is able to last you until you’re 95 years old, or you’d just be stuck with being able to use 90% of it.

The Golden Number: 95

If you’re still very confused about the entire system and this all sounds like gibberish to you, just remember the golden number is 95.

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If your age + the remaining lease left on the property is more than 95, you can get to use your CPF to pay 100% of it and you’ll get an HDB loan of 90%.

But, if your age + the remaining lease left on the property is less than 95, you can get to use your CPF to pay only 90% of it and you’ll get an HDB loan of 81%.

Quite simple, right? If not, perhaps you might want to contact your property agent for a better explanation.