How much CPF can I use for second property – Complete Guide

How much CPF can I use for second property - Complete Guide

Table of Contents

Introduction

Planning for your second property purchase ? You would soon realise that navigating the challenges that is brought forth with a second property purchase is one notch higher in terms of complexity, versus your first property purchase.

There are unique government policies and financing limitations that are applicable to your second property purchase, that you may not encounter when purchasing your first property.

To provide a sense of what lies ahead, the slew of consideration to be made when making your second property purchase includes the following.

Focus for today

In today’s article, we will dedicate attention to covering the details on using CPF to finance our second property purchase.

When it comes to 2nd property financing, there are generally three sources of funds that would make up your property purchase.

  • Cash – from savings or proceeds from sale of previous property
  • Loan – private bank loan, quantum to be determined by LTV limits and TDSR
  • CPF

CPF remains an important source of funds for your second property purchase as it can help pay for your down payment, reducing the burden on cash requirement. It can also help support your monthly mortgage instalment.

The crux lies in how and how much CPF can you use to finance your 2nd property.

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What can CPF be used to pay for

The CPF monies in your account can be used to pay for the following

  • Part of the down payment for your property purchase
  • Monthly mortgage for you for your property
  • Stamp duties, buyer stamp duties and additional buyer stamp duties
  • Insurance premium for home protection scheme, a mandatory mortgage insurance for HDB
  • Legal fees

You will not be able to use your CPF to pay for the following

  • Renovation cost
  • Cash over valuation
  • Property agent commission
  • Seller stamp duties

Can CPF be used to pay for 2nd property ?

Addressing the elephant in the room, can CPF be used for 2nd property purchase ?

The short answer is yes.

CPF can be used to fund your second property purchase, but certain criterias established by the CPF board must be satisfied first before you are permitted to do so.

Criterias to be satisfy before you can use CPF to fund 2nd property purchase

To facilitate understanding of the criterias set by CPF, let’s first understand the core purpose of our CPF funds. CPF is established by the government to ensure Singaporeans have a basic level of savings to support a basic standard of living during retirement.

The general criteria that needs to be satisfied before you can use CPF to fund your 2nd property is the following.

The property must have more than 20 years of remaining lease. It is important to note that property with less than 20 years of lease cannot be funded with CPF.

And given that you have an existing property that is financed with CPF ordinary account (OA) savings, you will first need to set aside the applicable Basic Retirement Sum (BRS) or Full Retirement Sum (FRS) before you can use your CPF to fund your second property purchase.

We will elaborate further on details for both the BRS and FRS in sections that follow.

Generally, the total amount of CPF will be up to the purchase price or valuation price of the property, whichever is lower.

The lease of your property and the age of the owner will have an impact on the total amount of CPF that can be used as well. Similarly, we will expand on this in the section that follows.

What is Basic Retirement Sum and Full Retirement Sum ?

Retirement sums are reference points or thresholds established by CPF that indicate how much one would need to save to ensure reasonable monthly payout during retirement.

There is generally three levels of retirement sum

  • Basic retirement sum (BRS) is the first level, providing sufficient monthly payout to cover basic living expenses, excluding rental or housing expenses
  • Full retirement sum (FRS) is the next higher level, it is a larger amount and provides a larger monthly payout that caters for expenses beyond basic living expenses.
  • Enhanced retirement sum (ERS) is the highest level, it is meant for those who seek to have a higher monthly payout beyond that of Full retirement sum.
55th birthday in the year ofBasic Retirement Sum (BRS)Full Retirement Sum (FRS)
2023$99,400$198,800
2024$102,900$205,800
2025$106,500$213,000
2026$110,200$220,400
2027$114,100$228,200

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The different scenarios in which you can utilise CPF for 2nd property purchase

Now that we have discussed, in earlier sections the general criterias in which CPF can be used for second property purchase and establish a basic understanding of what is basic retirement sum and full retirement sum.

Let’s move on to articulate the different specific scenarios that you can use your CPF for your 2nd property. We will discuss in detail when you need to set aside basic retirement sum or full retirement sum and how much CPF can be used.

Scenario A – When the remaining lease of the 2nd property you are looking to purchase, covers the youngest owner to 95 years old

In this scenario, assuming you are purchasing a relatively new property with a long lease life and it can cover the youngest owner till the age of 95 years old.

You will need to set aside the required basic requirement sum (BRS) in your CPF Ordinary account. After which, you will be able to use the CPF monies exceeding the BRS amount to pay for your second property.

If you are above 55 years old of age

Both monies in your CPF special account (SA) and ordinary account (OA) can be used to fulfil the basic retirement sum (BRS).

Amount of CPF that can be used

For a property will lease life that can cover the youngest owner till the age of 95 years old. You will be able to utilise CPF till the purchase price or valuation price of the property, whichever is lower at the time of purchase.

Example

John and Sally are looking to purchase their second property.
John is 50 years old and Sally is 35 years old.
The remaining lease on the property is 60 years.
The property is valued at $1.0 million and purchase price is $1.1 million

Given that the property has a lease life of 60 years and can cover Sally the youngest buyer till the age of 95. And assuming John and Sally have set enough money in the CPF account to reach their basic retirement sum. They will be able to utilise CPF in excess to pay for the purchase of the second property.

The maximum CPF amount they can use is $1.0 million, lower of the purchase price or valuation value.

Scenario B – When the remaining lease of the 2nd property you are looking to purchase, does not covers the youngest owner to 95 years old

The following 2 alternative scenarios need to be considered.

Scenario B.1 – When your existing property covers the youngest owner to 95 years old.

Given that your 2nd property is an old development with a short lease life but your current property is able to cover the youngest owner till the age of 95 years old.

You can proceed to use the excess of your CPF monies to fund the second property after setting aside the applicable basic retirement sum (BRS)

Reminder : remaining lease life must at least exceed 20 years in order for CPF to be used.

Similarly if you are above age 55 at the time of purchase

You can utilise CPF monies in both your special account (SA) and ordinary account (OA) to meet the basic retirement sum.

Maximum amount of CPF you can used will be reduced

In this case when the remaining lease of your 2nd property cannot cover the owner till age of 95 years old. You will not be able to utilise CPF till the full valuation amount or purchase price of property.

A prorated amount will be dependent on the remaining lease and will be used to determine the maximum withdrawal limit for your CPF usage on the 2nd property.

The formula for calculating the prorated amount will be as follow

For convenience you can use the following CPF calculator to calculate the maximum valuation limit as well.

Example

John and Sally are looking to purchase their second property.
John is 50 years old and Sally is 35 years old.
The remaining lease on the property is 30 years.
The property is valued at $1.0 million and purchase price is $1.1 million

Consider the same example used in the earlier section previously, the property they are looking to purchase only has a remaining lease of 30 years. (greater than 20 years)

But their first, existing property has a longer lease life of 70 years, which can cover Sally till 95 years old.

They will be still be able to use the CPF monies in excess of their basic retirement sum to fund the second property purchase.

But the maximum amount of CPF they can use is capped at, $260,000 the prorated limit of the property remaining lease life.

Scenario B.2 – When both the lease life of your 2nd property and existing property is unable to cover youngest owner till the age of 95 years old

Recall the purpose of our CPF funds, it is to ensure that our retirement years are properly taken care of in terms of both living expenses and housing expenses.

Need to set aside full retirement sum instead of basic retirement sum

In the case whereby both your current and second property’s lease life is unable to cover the youngest owner till the age of 95 years old. You would have to set aside a higher amount in CPF account, this would comprise the full retirement sum (FRS).

The FRS amount is twice the basic retirement sum (BRS) amount, it seeks to provide retirement funds to cover both living and rental expenses.

Similarly, if you were to be older than 55 years of age, you would be able to use CPF monies in both your SA and OA account to fulfil the FRS requirement.

Maximum amount of CPF you can used will be reduced

The maximum amount, also known as withdrawal limit, will be reduced similarly to earlier sections as lease of second property is unable to cover the youngest owner past 95 years old.

Example

Staying consistent with the same example used earlier.

John and Sally are looking to purchase their second property.
John is 50 years old and Sally is 35 years old.
The remaining lease on the property is 30 years.
The property is valued at $1.0 million and purchase price is $1.1 million

But their current property is also a old development with a short lease life of 30 years

Given that both properties are not able to cover Sally, the youngest owner till the age of 95, Sally would have to set aside more money in their CPF account to meet the full retirement sum before being able to use CPF to fund the second property.

Methods to avoid having to set aside BRS or FRS amount in CPF, while funding 2nd property

There are occasions whereby you would like to fully allocate all your CPF savings into your property portfolio and not want to set aside the basic retirement sum or full retirement sum.

Generally, decoupling and sell one buy two are methods that can be considered to ensure you enjoy enhanced or maximum financing options for your second property purchase.

Both these methods seek to de-link a couple’s name from a jointly owned property.

Decoupling does it via an internal buy and sell transaction between a couple, having one party purchase share of ownership from the other.

Sell one buy two seeks to realise the capital gain from current property via a sale and having the couple each purchase separate property under their names.

Both these methods result in each party only having only one property funded by CPF, under each person’s name. This could facilitate optimal usage of CPF, without having to set aside basic retirement sum or full retirement sum.

For a more detail write up on decoupling check out our complete guide on decoupling.

For a comprehensive guide on sell one buy two check the following article.

More reads, more gains ?

Kudos on making it this far. The fact that you have invested the last 5 mins reading this article. We believe you are a like minded real estate investor looking to beat the rat race by getting more out of your real estate investment.

If so, do check out the following articles.

FAQ

Can CPF be used to buy 2nd property ?

In short, yes. CPF can be used to buy 2nd property. You would need to first set aside basic retirement sum (BRS) or full retirement sum (FRS) in your CPF account first. The excess of CPF monies after setting aside those amounts can be used to fund your 2nd property purchase. 

What is the CPF withdrawal limit for 2nd property ?

CPF withdrawal limit for 2nd property would be 100% of valuation limit. The lower value of purchase price or valuation price. You may use the excess of your CPF monies to fund your 2nd property purchase after setting aside basic retirement sum (BRS) or full retirement sum (FRS) in your CPF account.

Can I use CPF to pay rent ?

No, you will not be able to use CPF to pay rent. You will need to use rent to fund your rental expenses. You will not be able to use CPF funds to fund the expenses such as monthly rental, condo maintenance fee, property agent commission and seller stamp duty.

What can I use my CPF to pay ?

You can use your CPF to pay for the expenses such as buyer stamp duty, additional buyer stamp duty, legal fee, insurance premium for home protection scheme, home mortgage and payment for property.

Author

  • Jue Wen

    Jue Wen is the content marketing lead. This means he spend his waking hours researching and writing all things real estate. He believes life is a hustle and there is no joy in grinding away daily in our little rat races. He believes making wise moves in real estate investment can be a game changer. Aside from writing all things real estate, you can find him in your nearest bouldering gym.

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Jue Wen

Author

Jue Wen is the property analyst and content marketing lead at decoupling expertise.
He specialises in helping clients overcome the complexities involved in owning their second private property in Singapore.
He had over 10 years of experience in real estate investing and have written over 40 detail guides on decoupling and minimising ABSD. He is a licensed real estate consultant and holds a Bachelor degree in Business Management from the Nanyang Technological University.

Kenji

Co-Author

Kenji is the Group Division Director of ERA Realty Network.
He have got over 20 years of experience in real estate and have successfully helped over 50 couples purchased their second property. He specialises in helping client achieve the best approach towards acquiring their ideal investment properties while minimising ABSD.