When we talk about CPF and housing, we often think of it in terms of how we can use our CPF savings to buy our home. What about what happens after, when it’s time to sell the house?
To ensure that you have enough retirement savings when you sell your property, you will need to refund the amount you would have accumulated in your CPF if you had not used it for your housing.
Hence, if you’ve used your CPF savings to finance your property, you will have to refund to your CPF account:
- the principal CPF amount (P) which you have withdrawn for the property; and
- the accrued interest (I) which you would have earned if the savings were not taken out from your CPF account.
By restoring your retirement funds this way, you can be better prepared to meet your needs during your golden years.
Here’s how the accrued interest on the principal amount used for housing is calculated:
If Praveen withdraws $150,000 from his CPF account for his housing loan in January 2018, the accrued interest will be computed on $150,000 at 2.5% per annum from February 2018.
In the event that he sells his house in December 2018, the accrued interest will be computed for 10 months from February 2018 to November 2018. The total accrued interest would be $3,125 (i.e. $150,000 x 2.5% x 10/12 months). Praveen would have to refund a total of $153,125 to his CPF account.
However, if Praveen decides to sell his house only in December 2019, the accrued interest from January 2019 will be computed on both the CPF principal amount withdrawn and the accrued interest in 2018.
The total accrued interest would be $6,953.76, based on the total of the following:
In this case, Praveen would have to refund a total of $156,953.76 to his CPF account if he sells his house in December 2019. While Praveen can calculate his CPF accrued interest, he doesn’t have to do these calculations himself! He can always log in to my CPF Online Services to view his accrued interest (under “My Statement”).
- Accrued interest for February 2018 to December 2018, i.e. $150,000 x 2.5% x 11/12 months = $3,437.50
- Accrued interest from January 2019 to November 2019, i.e. ($150,000 +$3,437.50) x 2.5% x 11/12 months = $3516.26
Information accurate as at 26/1/2018.