CPF Housing Withdrawal Limit

Mr Ong Teng Koon asked the Acting Minister for Manpower (a) whether the CPF Housing Withdrawal Limit of 120% of the valuation limit is sufficient to fully finance a typical loan of 20-25 years at a typical interest rate of 2%-5%; and (b) how can the Ministry help low-income families with limited cash and CPF savings in their Ordinary Account and Special Account of less than 50% of the Minimum Sum use their CPF funds to fully finance a housing loan when the Withdrawal Limit is reached.

First, let me clarify the limits that are set on use of CPF savings for housing. The Valuation Limit (VL) is set at the lower of the purchase price or property value at the time of purchase. A member would need to have set aside half the Minimum Sum8 to use CPF savings beyond the VL. The Withdrawal Limit (WL) is the absolute cap on the amount of CPF savings that can be used for housing, and is set at 120% of the VL.

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Whether a member is able to fully finance his housing loan with his CPF savings depends on several factors, including the property price and corresponding loan amount required as well as the loan tenure and interest charge. Most CPF members have been prudent and have taken the CPF usage limits for housing into account before deciding which property to purchase. In this way, they have avoided overstretching themselves and hence leave sufficient CPF savings for their retirement needs.

Today, the number of CPF members who have reached their VL and are unable to set aside half the Minimum Sum is small – at less than half a per cent of those who are using CPF to service their housing loans. For affected members, where the case merits, we have exercised flexibility and allowed them to use CPF savings beyond the VL. The number of members who have reached the WL is even smaller. The VL and WL also do not apply to members who purchase a new flat directly from HDB and finance the property via a HDB loan.

The VL and WL continue to serve an important purpose in ensuring that CPF members purchase a property which they can afford, without having to deplete their retirement CPF savings. CPF members should buy a home within their means, and factor in the CPF usage limits in their financing plans.