More than just a roof over your head, your home is safe haven where you lay your roots and create wonderful memories with your loved ones. Your home can also be part of your retirement nest egg when you approach your golden years. Your 1st Steps
Buying your dream home begins with an understanding of the type of home you want, housing prices and your personal finances.
For a realistic estimate of a housing budget, you can try Our First Home Calculator
. This will give you an idea of the type of home you can afford.
Just like any other loan, you should review your income and other financial obligations, as well as research the terms of each loan, before committing to a home loan. For more on home loan, click here.
If you are buying an HDB flat, you have the option of taking an HDB loan or a bank loan. Do note that different terms and conditions may apply for an HDB loan, depending on your credit assessment, HDB's mortgage loan criteria, and the type of flat that is being purchased. For more info on HDB loans, click here.
When taking a bank loan, do note that your housing loan eligibility will be based on the Total Debt Servicing Ratio (TDSR), which is a computation of your total monthly debt obligations (for example: existing home loan, new home loan that you are applying for, car loan, overdraft facilities, other credit facilities and recurrent debt obligations) against your total monthly income.
Your Total Debt Servicing Ratio should not exceed 60% and your housing instalment should not exceed 30% of your monthly gross income.
Using Your CPF Savings For Your Home Purchase
Your savings in the Central Provident Fund (CPF) can help you with financing your home purchase. The monies from your Ordinary Account can be used for the following housing-related payments:
If you are buying an HDB flat, you may be eligible for a housing subsidy in the form of the CPF Housing Grant. These subsidies are available for both new and resale flats and can be used for the initial payment or to reduce the mortgage loan for the home purchase. For more information:Do note that CPF limits may apply to the amount of Ordinary Account savings you can use. You should keep these limits in mind when planning your home purchase. These limits are in place to help ensure you have sufficient CPF savings set aside for your retirement needs. As your CPF contributions also decrease over time, it is prudent to pay off your housing loan by 55.
- Down-payment for the purchase of your home
- Housing loan taken for the home purchase
- Stamp duties, legal fees and other related costs
- Loan taken for the construction of your home or the purchase of vacant land, including the construction of a house (applicable for private properties only)
Properties with Shorter Leases
If you purchase a resale HDB flat, it is important to take note of its remaining lease as it may affect the amount of CPF savings you can use for your home.
You will not be able to use your CPF savings for the home purchase if:
The limits have been put in place to help ensure that you have a home during your retirement years. In addition, as properties with shorter leases tend to depreciate faster, these limits encourage you to assess the trade-offs between keeping your CPF savings for your retirement and financing your housing instalment.
- The remaining lease is less than 30 years; or
- The remaining lease is less than 60 years (but more than 30 years) and your age plus the remaining lease is less than 80 years.
If you are using your CPF savings to finance your monthly housing instalments, you are required to be covered under the Home Protection Scheme
. The Home Protection Scheme is a mortgage-reducing insurance that helps to pay for your outstanding home loan should you become permanently unfit to work or pass away.
If you are buying a private property, you are encouraged to be covered under a mortgage-reducing insurance plan with a private insurer.
Having appropriate and adequate home insurance coverage from general damages is just as important, as it provides financial protection from risks such as fire and theft. Do find out more as different policies offer different extent of coverage, and that not all losses are payable.
Selling your home
As you move through different stages of life, you may want to consider right-sizing your home to suit your needs.
Do note that if you have used your Ordinary Account savings for your home purchase, you will need to refund the amount you withdrew, including the accrued interest, to your CPF account when you sell the house at market value (this applies to both public and private properties).
If you are aged 55 and above and had pledged your home to withdraw your Retirement Account savings in cash, you will need to refund the pledged amount on top of the principal CPF withdrawn and the accrued interest when you sell your home. The monies refunded will be used to top up your Retirement Account up to your Full Retirement Sum. After this, any balance housing refunds will be paid to you in cash within one week after the CPF refund was credited to your CPF account.
For your next property purchase, you can still use your monies in your Ordinary Account as well as the Retirement Account savings above your Basic Retirement Sum.
For many young couples thinking about buying their first home, a common question asked is: "Should I buy a new Build-To-Order flat or a resale flat?" With resale prices subject to open-market forces, many have opted for Build-To-Order flats, which are more affordable, to minimise paying the cash over valuation for resale flats.
Ms Eileen Chan and her husband did just that when they purchased an affordable BTO flat in Sengkang in 2009, instead of choosing a resale flat in a mature estate. With monthly housing loan payments paid entirely using their CPF savings, they enjoy greater flexibility in managing their cash flow.
"Although it would have been more convenient to buy an HDB flat in a mature estate like Serangoon or Tampines, where our parents live, we found the BTO flats to be more affordable. If we had bought our matrimonial home in a mature estate, we would have had to top up the monthly housing loan instalments, which are currently deducted from our CPF savings, with cash. Having purchased the BTO flat, we have cash to look into other areas of expenses for the family, especially with a new addition to the family." – Ms Eileen Chan and family.
Home ownership is possibly the largest financial investment you will make in your lifetime. Choosing a home that suits your budget with a prudent loan quantum and term can be helpful, as you will need to set aside your CPF savings for your healthcare and retirement needs in the future.