What is CPF Accrued Interest? Who should Use less CPF for property mortgage

There are different views regarding the use of CPF for buying property and mortgage payments. In this article we will explain what is CPF accrued interest and discuss the situations when is it better to use CPF and when is it not?


     Table of Content

  • What is Accrued Interest?
  • Reasons for Not Using CPF OA funds?
  • Who Should Use CPF OA?
  • Conclusion


    📌 What is Accrued Interest?

  • When buying a condo or HDB flat, you can use your CPF Ordinary Account (OA) for: Down payment, Stamp duties, Legal fees and Monthly mortgage.
  • However, you will need to return the principal amount with accrued interest when the property is sold.
  • CPF accrued interest is the amount of interest that your CPF account would have earned if the funds were not taken out and used for your housing payments.
  • For example: If you use $200,000 CPF OA to buy a HDB and sell it after 5 years, the accrued interest will be about $26,000 based on OA interest rate of 2.5%. In total, the amount that would have to be returned to your CPF OA after the sale of your property would be $226,000.
  • To check “total accrued interest”, you can login to CPF Online Services and check under “My Statement”
CPF accrued interest

  📌 Reasons for Not Using CPF OA

  • There are those that advocates using more cash and savings to pay for the down payment and monthly mortgage.
  • Their biggest fear is that the principal plus accrued interests may snowball into a very large sum, especially when it is compounded over many years.
  • Those who will feel the biggest impact of accrued interest will on older HDB flats which do not appreciate much due to lease decay.
  • These older HDB flat buyers may not be able to return their CPF savings in full after selling their house

📌 Who Should Use CPF OA?

  • The supporters of using OA for property believes that it is better to hold on to cash and fully capitalise CPF monies as that can only be withdrawn at age 55.
  • They are mainly younger Singaporeans in their 30s or 40s and are financially savvier.
  • It is important to have more cash on hand so as to be able to invest in stocks or fund themselves through higher education.
  • CPF accrued interest is not a liability to them because it is still their money at the end of the day and you would not have to pay it back into your OA unless you sell your property.

📌 Conclusion

Paying your property using CPF is the better option for buyers who can take charge of their finances properly

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Dennis Lim

Dennis has more than a decade of experience investing in real estate. Like many fellow Singaporeans, he grew up in a HDB flat with dreams to live in a condominium. Through careful financial planning & hardwork, this became a reality when he was 30. He now owns 3 private properties in Singapore and has helped hundreds of Singaporeans to achieve their goal of upgrading their homes in land-scarce Singapore.

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