Buying a second property in Singapore is an exciting investment move, but financing it can be tricky, especially with CPF loan for second property restrictions. While CPF savings can help cover the down payment for second home and mortgage repayments, strict conditions apply.
To maximise CPF usage while ensuring long-term financial security, you need the right strategy. Whether it’s decoupling ownership, choosing the right lease tenure, or planning for the second house mortgage, each approach can make a significant difference.
Here’s a deep dive into five strategies to help you use CPF effectively when purchasing a second property.
1. Meet the Retirement Sum Requirement to Unlock CPF for a Second Home
Before using your CPF for house mortgage on a second property, you must ensure that you have set aside the Basic Retirement Sum (BRS) in your CPF accounts.
How This Works:
The BRS requirement ensures that CPF members retain sufficient savings for retirement before using excess CPF funds for a second home loan.
Only CPF Ordinary Account (OA) funds above the BRS can be used for the second property mortgage.
If the property’s lease does not cover the youngest owner until age 95, a higher Full Retirement Sum (FRS) may need to be set aside, limiting CPF usage further.
Example:
In 2024, the BRS is $102,900, and the FRS is $205,800.
If you are 45 years old and have $150,000 in your CPF OA, only the funds above $102,900 (i.e., $47,100) can be used for the second property.
If the second property does not cover the youngest owner until age 95, CPF usage is restricted, and a larger sum must be set aside.
Key Takeaway: Plan your CPF contributions early to ensure you meet the required retirement sum, allowing for maximum CPF withdrawal on a second home.
2. Decouple Property Ownership to Avoid CPF Set-Aside Requirements
Decoupling is a legal method where one co-owner sells their share of a property to the other, allowing the first owner to purchase a second property without incurring Additional Buyer’s Stamp Duty (ABSD).
How This Helps CPF Usage:
When one spouse becomes the sole owner of the first home, the other can buy a second home as a “first-time buyer”, avoiding the 20% ABSD.
This also allows both parties to use CPF OA savings independently, maximising CPF usage for the second home mortgage.
Decoupling frees up CPF funds from one partner, ensuring that CPF set-aside rules don’t limit the second home purchase.
Example:
Tom and Sarah own a condo jointly.
Tom sells his 50% share to Sarah, making her the sole owner.
Now, Tom can buy a second property without the 20% ABSD and use his CPF OA balance freely for the CPF housing loan.
Key Takeaway: If you and your spouse plan to invest in multiple properties, decoupling can help avoid CPF restrictions while reducing upfront costs like ABSD.
3. Sell Your First Property Before Buying the Second
Selling your first property before purchasing a second one can free up CPF funds, giving you greater financial flexibility for a second property mortgage.
Why This Works:
When you sell a property, CPF funds used for the first home must be refunded to your CPF OA with accrued interest.
This refunded amount can then be used for the down payment for second home and mortgage payments.
Additionally, if you sell the first home within six months of buying the second, the CPF set-aside requirement is waived.
Example:
Mark owns an HDB flat and plans to buy a private condo.
He sells his HDB flat first, which refunds $250,000 (including accrued CPF interest) to his CPF OA.
Now, he can use these CPF funds for the second house mortgage, reducing his cash outlay.
Key Takeaway: Selling your first home before purchasing a second helps maximise CPF availability while eliminating CPF set-aside constraints.
4. Choose a Longer-Lease Property to Maximise CPF Withdrawal
CPF usage is limited by the remaining lease of a property. The general rule is that the lease must be at least 20 years, and it should cover the youngest owner until age 95 for full CPF usage.
Why Lease Tenure Matters:
If the lease is too short, CPF usage is prorated, reducing the amount you can withdraw.
Properties with 99-year leases allow for greater CPF withdrawal, making financing easier.
Older leasehold properties with shorter remaining leases may limit CPF financing, affecting your second home loan requirements.
Example:
David (50) and Lisa (40) want to buy a second home.
A 99-year lease condo allows full CPF usage.
A 35-year lease property means CPF usage is prorated, requiring more cash financing.
Key Takeaway: If you plan to use CPF extensively, choose a newer leasehold property to ensure maximum CPF eligibility.
5. Plan CPF Usage Wisely to Avoid Accrued Interest Pitfalls
When you use CPF for house mortgage payments, CPF charges accrued interest on the amount withdrawn. This means when you sell the property, you must refund the CPF principal plus accrued interest, which can reduce your cash profits.
How to Avoid This Pitfall:
Use CPF only for essential payments (e.g., down payment) and pay off the mortgage partially with cash.
Track your CPF usage carefully to avoid excessive accrued interest accumulation.
Consider voluntary CPF contributions to build your OA balance for future mortgage use.
Example:
Linda withdraws $300,000 CPF for a property.
Over 10 years, accrued CPF interest is $50,000.
When selling, she must refund $350,000, reducing her cash profits.
Key Takeaway: Be mindful of CPF accrued interest and plan CPF withdrawals strategically to minimise long-term financial impact.
Final Thoughts
Using CPF for a second property mortgage can significantly ease your financial burden—but only if managed wisely. By implementing the right strategies, you can maximise CPF usage while ensuring financial security.
Discover how much CPF you can use for a second property mortgage in Singapore. Learn about CPF withdrawal limits, down payment rules, and smart strategies to maximise your CPF for a second home loan while avoiding financial pitfalls.
Whether you’re planning to invest in a second home or upgrade your property portfolio, these strategies ensure you make the most of CPF without compromising on retirement security. Before making any moves, consult a financial planner or mortgage specialist to tailor your CPF and mortgage plan for optimal results!
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