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CPF Rules for Buying Old HDB Flats to be Relaxed

Posted by Team SGHomez on March 28, 2019
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  • 2 min read by Team SGHomez

The rules governing the use of CPF (Central Provident Fund) financing for the purchase of older housing board flats will soon be relaxed.  This is according to the minister in charge of the National Development docket. Speaking at the parliament buildings, Lawrence Wong revealed that the ministry would release the new changes on CPF come May this year. Here is a brief summary of the current CPF restrictions.

  • Effective 1 July 2013, the use of CPF as well as the Housing and Development Board loans, was strictly restricted on the purchase of flats with lease period, not more than 60 years. The financiers are not willing to give loans for use in purchasing flats around 64 years old.
  • The down payment and monthly mortgage for the flats that are 69 years old or those with a lease period of fewer than 30 years will not be paid off through the CPF financing.
  • The purchase of flats beyond the 79thyear to be fully paid in cash.

In his statement, Lawrence highlighted that “Some banks take reference from these CPF restrictions when assessing how much loan to extend. As a result, both the CPF and loan quantum may be reduced for the purchase of such flats”.

The new restrictions create a barrier for those who are willing to purchase the flats with a lease period of fewer than 60 years.

“The CPF rule is intended to safeguard the retirement adequacy of buyers who purchase older flats … its design has led to some unintended   consequences.” Said, Mr. Wong

He illustrates this using an example of a buyer who is interested in buying a flat that is 39 years. The buyer is entitled to do so using the full CPF. A year later, the amount that can be used is limited based on the argument that the flat is a year older. The reason that the flat is a year older, does not justify this limitation on the CPF amount.

Therefore, effective May when the rules come into force, the use of CPF will be relaxed. This makes it easier for the buyers interested in flats older than 60 years. The new rules introduce a change to the emphasis. This means that instead of paying attention to the lease period, the new rules focus on the adequacy of the lease. (That is if the flat will last to the end of the life of the buyer).

If you are facing a divorce case and would like to buy a HBD resale flat, contact SGHomez and ask for a divorce real estate agent specialist for assistance.

Follow us for more details on the new regulations.


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