Updated on May 22, 2023 by admin
If you’re a real estate investor, you may be curious about whether or not you can utilize your CPF to buy a second or third investment property. In a nutshell, the answer is yes. But there are limitations and precautions you should take note of.
This article will serve as a complete guide to investing in real estate using CPF funds, covering everything from the variations between spending money from your Ordinary Account (OA), Special Account (SA), and Retirement Account (RA), to the different restrictions and limits that apply.
There are still good grounds for expanding your property portfolio with other properties, even if you currently own one or more. Perhaps you’re debating various equity investments, or you’re looking to purchase a home for yourself, your family, or a loved one in the future.
At this juncture, the issue “Is it possible to use CPF funds (OA/SA/RA) to buy 2nd home in Singapore?” is on everyone’s mind.
Simply said, yes!
A second or subsequent home purchase may be made using CPF funds. However, this may not be as easy as utilizing your CPF money to buy your first home.
To better comprehend the examples that follow, let’s first compare the Full Retirement Sum to the Basic Retirement Sum.
Members who reach 55 between 2016 and 2022 are eligible for the Basic Retirement Sum:
| 55th birthday on or after | Basic Retirement Sum |
| Age 55 in 2016 | $80,500 |
| Age 55 in 2017 | $83,000 |
| Age 55 in 2018 | $85,500 |
| Age 55 in 2019 | $88,000 |
| Age 55 in 2020 | $90,500 |
| Age 55 in 2021 | $93,000 |
| Age 55 in 2022 | $96,000 |
From 2003 through 2022, members who reach age 55 are eligible for the Full Retirement Sum:
| 55th birthday on or after | Full Retirement Sum |
| 1 July 2003 | $80,000 |
| 1 July 2004 | $84,500 |
| 1 July 2005 | $90,000 |
| 1 July 2006 | $94,600 |
| 1 July 2007 | $99,600 |
| 1 July 2008 | $106,000 |
| 1 July 2009 | $117,000 |
| 1 July 2010 | $123,000 |
| 1 July 2011 | $131,000 |
| 1 July 2012 | $139,000 |
| 1 July 2013 | $148,000 |
| 1 July 2014 | $155,000 |
| 1 July 2015/6 | $161,000 |
| 1 January 2017 | $166,000 |
| 1 January 2018 | $171,000 |
| 1 January 2019 | $176,000 |
| 1 January 2020 | $181,000 |
| 1 January 2021 | $186,000 |
| 1 January 2021 | $192,000 |
When buying a second or subsequent home, the amount of CPF funds you may put towards the down payment might vary widely according to the timing of your purchase and periodic changes to the CPF rules:
Tips to use CPF funds to buy 2nd home in Singapore
1) Purchased assets prior to May 10, 2019
You may use your CPF funds for a down payment as long as the total amount doesn’t exceed the Valuation Limit (the lesser of the property’s purchase price and its market value at the time of acquisition).
The following age-based requirements apply to the acquisition of a second or subsequent property with a minimum remaining lease of 60 years between July 1, 2006, and May 10, 2019.
If you are less than 55 years old, you will need to set aside the current Basic Retirement Sum (BRS) from your CPF OA before you may use those funds to pay for a second or third property.
To make up for this, the BRS might use:
- Investment funds saved in a CPF Special Account (SA)
- CPF OA
For those over the age of 55, using your CPF OA funds to buy a second or subsequent home is contingent on first transferring their Basic Retirement Sum (BRS) to a Retirement Account.
2) Acquired property as of May 10th, 2019
If you’ve already used your CPF savings on a property, you can’t use them to buy another one unless the remaining lease on the property you already own or are acquiring, the one you’ve already used your CPF savings on, covers the youngest buyer until he or she is at least 95 years old.
Among the few variations I often encounter are:
- Whether you’re under or over the age of 55, if you’ve used CPF funds to buy a home, the lease on at least one of your properties must extend to the age of 95 or older.
- If you’re under 55 or over 55 years old and want to buy a home using CPF funds, the lease on all of your properties cannot extend until at least 95 years of age.
There is a 6-month grace period if you plan to sell your current home and use the proceeds from the sale to pay for a new home using your CPF. You are not required to put aside the relevant BRS or FRS during the grace period. During the leeway era,
- If the property is still under construction, six months after the Temporary Occupation Permit was issued; or
- If the newly acquired property is already finished, clause (b) must be met within six months of the acquisition date.
Explanation of the VL-based CPF limit in more detail
Use of CPF Limited to Percentage of VL Maximum
If the remaining lease term does not provide coverage to the youngest buyer until he or she reaches 95 years of age or more, the following method may be used to determine the prorated maximum CPF savings usage:
Pro-Rated CPF Usage = (Remaining lease of property – 20) / (95 – age of youngest buyer using CPF – 20)
3) Buying a Second or Third Home with Your CPF OA
The first thing you need to know if you want to utilize your CPF money to buy a second or third home is that you may only use your OA money for this. The usage of SA or RA funding is prohibited.
If you have enough money in your OA, you may use all of it to cover the down payment, stamp duty, and legal expenses when you buy a house. However, you should be aware of a few limitations.
To begin with, OA money may only be used to acquire a residence for your own or your immediate family’s usage. Investing in real estate for the purpose of rental income or capital gains is prohibited using CPF money.
Second, there are limitations on how much of your CPF you may use for a home or other real estate transaction. These limits are determined by your age, the amount you have borrowed in CPF housing loans, and the value of your home.
Here’s a chart showing how much of your CPF you can spend on a home purchase, to give you a sense of what these caps look like:
| Property Valuation | CPF Withdrawal Limit |
|---|---|
| Up to $500,000 | 120% of the Valuation Limit |
| Above $500,000 to $750,000 | $600,000 |
| Above $750,000 to $1 million | $750,000 |
| Above $1 million | Valuation Limit |
Keep in mind that your property may only be valued up to its purchase price or its fair market value at the time of acquisition.
4) Investing Using Your CPF Savings Account or Retirement Account
You may invest in real estate investment trusts (REITs) and other investment products allowed by the CPF using your SA and RA funds, but you cannot use them to finance the acquisition of a second or subsequent property.
CPF investors like real estate investment trusts (REITs) because of their consistent payouts and potential for growth in value. Returns on real estate investment trusts (REITs) are not certain and may change in response to market forces.
Opening a CPF Investment Account with DBS, OCBC, or UOB will allow you to invest in REITs using your CPF money. When you create a CPF account, you’ll have access to a broad variety of investment options, including real estate investment trusts (REITs).
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Indeed, that is the case. The CPF may be used to fund the acquisition of a second or even third home. After you’ve set aside enough for retirement, you can use the rest of your CPF savings to buy that second home.
Affordability, the Additional Buyer Stamp Duty (ABSD), the Total Debt Servicing Ratio (TDSR), and the Loan-to-Value (LTV) limit limitation on mortgages all need to be taken into account when purchasing a second or subsequent home.
If you want expert guidance or additional information before moving through with a purchase, feel free to get in touch with me.
I’m hoping that after reading this, you’ll have a better understanding of how to use your CPF money to buy more than one property in Singapore.
If you have any questions or concerns concerning the use of your CPF funds, please don’t hesitate to get in touch with me.
