Many people are under the impression that when they sell their house for higher than what they
bought it for, they will get to pocket the cash profits.
But this is often not the case, and in some cases, many sellers have even found themselves needed
to pay extra money to CPF after selling their house!
How does this happen?!
Let’s break it down and illustrate using an example scenario. (This is from a real case that I handled
HDB Loan : 2.6% interest
CPF : 2.5% accrued interest
Total interest : 5.1%
This particular HDB owner had bought a HDB flat 10 years ago for $380,000.
It was paid using mostly CPF.
His outstanding loan remaining on the house is $174,856.
He sold it now at $470,000.
Total CPF used was $261,480
CPF accrued interest works out to $52,773
Total = $314,253
Cash proceeds = $470,000 (Sale Price) – $314,253 (total CPF) – $174,856 (outstanding
mortgage loan) = – $19,109 (nett negative)!
In this case, the owner had to fork out $19,109 in cash to repay his own CPF account, because
that would be the difference if he hadn’t touched his CPF funds to pay for his house in the first place.
Why does this happen?
When we buy a house , many of us usually use our CPF-OA (2.5%) to pay for the HDB Loan
Monthly Installments (2.6% interest). Once our loan is fully paid, we assume we no longer have any
housing debt outstanding, not realising that the CPF we have used to pay for our house is still being
This is because CPF funds are largely designed for retirement, and if one were to use their CPF
funds to pay for a house, then you will need to pay back the difference in cash compared to what
you would have in your CPF by now if you had left it untouched.
In other words, there is this “invisible 2.5%” accrued interest that many people do not realise, or
This is the reason why many owners face the problem where their cash proceeds of the house is
actually eaten away – by their CPF accrued interest! This is what we realtors call a “negative sale”,
which is the worst case scenario when you purchase a house.
A good realtor will NEVER let you fall into the realms of a negative sale, and will advise you against
it. Any real estate agent who takes your commission and lands you in the circumstances of a
negative sale without advising you accordingly could be a dangerous engagement for you.
Therefore, do not assume that as long as you sell your house for higher than what you bought it for,
you will definitely make a profit. It is not that simple.
So is it worth selling your house now? If you’re having thoughts of doing so, feel free to contact me –
I do asset planning and financial roadmaps for my clients when it comes to buying and selling their
Do note though that if your circumstances are not suitable, I will not fail to tell you that perhaps
holding onto your house is a better idea than selling it.