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28 Oct 2020 

SOURCE: CPF Board

​​What comes after you've successfully popped the big question? Purchasing your very first home together, of course! As the excitement of hitting your first home goals builds, learn how your CPF can support your housing needs. Here are 4 questions to ponder over as you discuss financing options with your partner for your future home:

An infographic on 4 things to know before buying a HDB flat

1. How much can we afford?

 

Before setting your heart on a flat, work out a suitable housing budget based on your income and current financial commitments. It’s important to pick an affordable housing with a comfortable monthly repayment that will not leave you stretched in the long term. 

 

Besides the flat purchase price, remember to plan for related fees (e.g. stamp duty and legal fees), as well as your renovation expenses. If you are taking a housing loan to finance your flat purchase, keep in mind that your monthly loan instalment must not exceed 30% of your gross monthly income. These limits are in place so that you can cover your basic expenses and financial commitments, while setting aside part of your income for personal savings and future needs!

 

Another thing to keep in mind is that the more you spend on housing, the less savings you may have for your retirement — so remember to find a balance! 

 

Try Our First Home Calculator to estimate the purchase price of a property and housing loan based on your income and ability to service the loan. This would give you a clearer idea of how much your dream home could cost and how long it would take you to pay off the housing loan.


2. Which CPF housing grants are we eligible for?

 

Have your sights set on a Build-To-Order (BTO) flat? You may be eligible for the Enhanced CPF Housing Grant (EHG) of up to $80,000! Your average gross monthly household income1 will determine how much you would receive from this grant. You and/or your spouse or fiancé(e) must also be working continuously for at least 12 months before the flat application, and remain working at the time of the flat application. 

 

For instance, with a combined income of $6,500, you would be eligible for a grant amount of $30,000 to offset the cost of your BTO flat.

 

A resale flat got your heart singing? You may be eligible for the Family Grant of up to $50,000. Those who meet the conditions for the Family Grant may also apply for the EHG of up to $80,000. Additionally, if you are buying a resale flat to live near or together with your parents, you may also apply for a Proximity Housing Grant of up to $30,000!


3. What type of housing loan should we pick?

 

Whether you choose to take a loan from HDB or from financial institutions, it’s essential that you weigh the pros and cons of either option!

With a housing loan from a financial institution, you will have to pay 20% of the flat’s purchase price as downpayment when you sign the Agreement for Lease. 5% is payable in cash while the remaining 15% can be paid in cash or CPF savings. Financial institutions can only grant a maximum loan quantum of up to 75% of the purchase price, so note that you will also have to pay the balance 5% of the purchase price using cash or CPF when you collect the keys to your flat. Mortgage interest rates also vary depending on the financial institution, features of the loan package and market conditions. With a bank loan, you can choose to set aside any amount in your Ordinary Account (OA) savings to continue growing your savings for retirement.

On the other hand, if you choose an HDB housing loan, you can use your OA savings to fully pay for your 10% downpayment. The interest rate of an HDB housing loan is currently 2.6% p.a., pegged at 0.1% above the prevailing OA interest rate. You also have the option to set aside $20,000 in your CPF OA, allowing you to grow your savings at an attractive interest rate of up to 3.5% p.a.!²

When you have decided on a suitable housing loan, check the terms and conditions and ensure that you have obtained sufficient financing for your intended flat purchase. 


4. How should we pay for our monthly housing loan instalments?

 

While your CPF savings can help you with your HDB flat’s downpayment as well as your monthly housing loan instalments, remember that your CPF savings are for your future retirement needs!

If you’re using a mix of cash and your CPF OA savings to cover your monthly home loan instalments, you would be able to keep some monies in your CPF OA. These monies would continue to compound at attractive interest rates of up to 3.5% p.a.​². 

Furthermore, your OA savings can also act as a safety net for your mortgage payments. For example, if you lose your job in the future or are in between jobs, the funds you’ve set aside in your OA can be used for your monthly housing loan instalments.

Therefore, it’s important to find a balance between using your cash and CPF OA savings for your monthly housing loan instalments!

Now that you’ve asked (and discussed!) all 4 questions with your partner, you’re ready to chart out your financial plan! Check out this online talk to help you get even savvier with your first home purchase.


1 This is the average gross monthly household income in a 12-month period prior to the flat application.

2 ​Including an extra 1% interest paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the OA.​

 

Information accurate as at 28/10/2020