NEW RULES ON CPF USAGE AND HDB HOUSING LOANS. HOW DOES IT AFFECT US?

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What do the latest housing rules mean?

New rules on buying properties are effective today (10 May 2019). How does this affect you?

Key points of the new rules

  • If you’re using CPF / HDB loan to buy a resale property, this will either benefit or restrict you – depending on your age and the remaining lease of the house. 
  • You can now use your CPF as long as your property have a remaining lease of at least 20 years at the point of purchase (previously more restrictive i.e. 30 years at the point of purchase). 
  • Can the property lease cover you (the youngest buyer) until at least age 95

Examples

Scenario 1: Youngest buyer’s age + remaining lease of the house (more than 20 years lease) = can cover you up to 95 years old

You may now use 100% of your CPF to pay for the property, up to its valuation limit (or applicable withdrawal limit if higher).

Loans:

  • HDB loan: you may now loan up to 90% of the purchase price or valuation of the house (whichever is lower)
  • Bank loan: you may loan up to 75% of the purchase price or valuation of the house (whichever is lower)

Scenario 2: Remaining lease on property does NOT cover the youngest buyer up till 95 years old

As long as the remaining lease on the property is more than 20 years, you can still use your CPF for the purchase, but it will be pro-rated.

If you’re getting HDB loan, the maximum loan will also be pro-rated.

If you’re getting a bank loan, the changes do not affect you and you may still loan up to 75% of the purchase price or valuation.

The bad news

Your usage of CPF funds and HDB loan may be affected if you buy older houses with shorter leases that do not cover you till age 95.

With the new regulations, the remaining lease on the property has to also be more than 20 years at time of purchase.

The good news

With the new rules, even if the property has less than 60 years of lease remaining, buyers can now fully utilise their CPF and take the full 90% HDB loan as long as the remaining lease covers the youngest buyer till age 95. This gives greater flexibility.

new-CPF-Percentage

So what do these new HDB rules mean for you?

FOR BUYERS

  • Younger buyers can now own a older flat more easily.

If you’re <35 years old, you can now use approx. 30% more CPF to purchase a HDB flat older than 40 years.

  • Buyers now have more options to consider purchasing a newer or older resale flat.
  • Buyers can now purchase a flat more confidently without worrying that the price of the house will drop drastically.

Previously, owners of houses that cross the 40 year mark would see a drop in selling prices as they no longer become appealing to most buyers, given that it would affect buyers’ CPF limits. However, this will now depend on the age of the buyer, so it opens up to a bigger pool.

  • Buyers who wish to stay near their parents in a mature estate may also do so more easily now, without worrying that you can’t sell off your house in the future.

FOR SELLERS

  • It may now be easier to sell your property.
  • Your property price will no longer be affected by the 40 years mark, since buyers will no longer be restricted by their CPF usage limit as long as their age is right.
  • It gives older flat owners more options to restructure their house according to their life stage so that they can prepare for retirement.
  • It gives younger sellers who are staying in an older flat more options to restructure their house and cater to their growing family needs.

Need help making sense of the different laws and regulations governing your CPF and loans for your property? Contact our team for expert knowledge and advice today.

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