There is no one-size-fits-all for buying a home or property investment because each individual or couple has different financial status, goals, and appetite. What works for one may not necessarily work for another. There are many debates on whether it is better to use CPF or cash to pay for a home loan. In the Part 2: Should You Use Cash or CPF to Pay for Your Home, it is leaning towards using cash instead of CPF, ESPECIALLY if you want to HOLD ON to the property for a longer period. However, in this section, you may see using CPF for property may still provide you with many opportunities. You can still grow your retirement fund if we consider that you will be selling off your property and upgrade within the next 5 years.  

Accrued Interest is NOT A LOSS

You need to know that the accrued interest is deemed “on loan,” which you need to pay back when you sell your property. This means 2.5% interest that you were supposed to have earned during the years you used CPF-OA funds to pay for your property need to be paid pack, on top of the principal sum you had used. 

It is NOT A LOSS; it just means LESS CASH you will receive from your home sale proceed. This interest amount will still be added to your CPF-OA in which you can still use to purchase your next property. Less cash will mean you have more in your CPF fund. 


Cash is KING

There is always a saying CASH IS KING. Before you decide whether you want to use cash to pay for your property, there are considerations:-

  1. You can’t use CPF to pay for your renovation and furniture, and you should avoid taking personal loans for renovation and your furniture purchase as these things can be funded by cash.

  2. Retirement funds should not be solely coming from CPF. It is not liquidable in which you cannot withdraw at any time. It is probably one of the best options to build your CPF, but it is not all. With cash, you can easily invest your cash to get better returns than 4% p.a. CPF is subjected to government policies as minimum sums, and withdrawal age can change anytime.

  3. It is important to keep emergency funds, which you never know when you will need the cash for unforeseen circumstances. It is important to have sizeable emergency funds and liquidity to deal with these situations than being a millionaire in CPF.

  4. By hoarding huge amounts of monies in your CPF to build your nest egg, you may not be fully maximizing your financial resources at hand. You could generate more returns to achieve a better balance in your investment portfolio.

It Doesn’t Matter Whether You Use CPF or Cash For Your First Property If You Intend to Sell in Next 5 Years

There are debates about whether it is better to use cash or CPF to pay for your property or home loan, and most ​are leaning towards using cash instead of CPF. However, as mentioned at the start, there is no one-size-fits-all for buying a home or property investment because each individual or couple has different financial status, goals, and appetite.

It takes more than what seems to decide whether using cash or CPF is the best option for each individual/couple. We will do some math and let the figures speak. 

Let’s use back the similar hypothetical scenario we had used in Part 1: Should You Sell Your HDB Flat:-

  • Both are Singapore Citizens, 30 years old.
  • Both earning $5,000 each with combined income of $10,000.
  • They bought a 4-room HDB BTO in a mature estate at $450,000.
  • They were the first-timer, and their BTO flat will be near to their parents’; thus, they will get a total of $70,000 of HDB grants (i.e., $50K for 1st-timer grant and $20K for proximity grant).
  • They decided to go for a HDB loan instead of a bank loan. 

As both were below 35 when they bought their BTO flat, 23% of their CPF contributions would have gone to their CPF-OA.

CPF contributions only apply up to a monthly gross wage of $6,000. Anything more than that is not subject to CPF contribution — either by the employee or the employer.

This means they will be contributing $27,600 yearly to their CPF-OA. Given CPF-OA interest of 2.5% and assuming they have been working for 5years, they should have a combined CPF-OA fund of about $145,000 at the time of purchase of the BTO flat.

Yearly CPF-OA = ($5,000 x 23%) x 12 months = $13,800 

5 Year CPF-OA Amount = $13,800 x (1+0.025)^5years x 2 persons = $145,000

To make things simple, let’s assume:-

The table below illustrates the 3 different options for financing the flat.

Option 1 – Using 100% cash to pay for the monthly HDB loan 

Option 2 – Using 100% CPF-OA fund to pay for the monthly HDB loan 

Option 3 – Using 50% cash and 50% CPF-OA to pay for the monthly HDB loan

*Saving in cash will depend on budget plan and discipline. The illustration is assuming the couple is able to save 20% of their monthly net income for 5 years

In short, we will see using cash to repay the monthly home loan will allow the couple to continue to grow their CPF funds. And no doubt, they will receive more cash return later when they sell the house since they have little to return to CPF. However, because repayment is in cash, this will mean that they will have less or no cash savings as they used cash to pay off the monthly mortgage. In other words, you will be CPF rich but cash poor. 

Let’s assume if the couple can save 20% of their monthly net income, i.e., $1,600, this will mean at the end of the 5 years, their cash fund should have $96,000 ($1,600 x 12months X 5 years). This cash saving may not be possible if the couple pays the monthly mortgage of $1520 in cash.

When the repayment of the home loan is made using CPF fully, the result will be the opposite of using cash in which the couple will have to pay back what they had taken out from CPF, including accrued interest. Nevertheless, they should have more cash savings, which definitely comes with a budget plan and discipline. If they never budget for the cash saving, this option will end up with less cash and the least total assets among the 3 options. 

Key Considerations Using Cash and CPF to Pay for Your Property

Under Part 1: Should You Sell Your HDB Flat, the key is to know your net worth and cash flow to make a sound decision. It would help if you explored whether it is best to stay in your current HDB home or whether it is feasible to restructure and move your funds into a better performing asset. 

CPF is a good saving and retirement scheme. Having a place called home and being able to retire when you are old are two important matters that you should not decide between the two. You need to do your sums as discussed in Part 2: Should You Use Cash or CPF to Pay for Your Home.

So now, let’s do a quick recap on the key considerations on using cash and/or CPF for your property.  

Key Considerations When Using Cash to Pay for Your Property

  1. You will need a budget plan to ensure you have a buffer to pay the home loan with cash and build your emergency fund.

  2. You do not have other forms of investments, i.e., stocks/bonds, etc., to generate higher returns than CPF. This means you will rely on CPF as your retirement fund.

  3. You have no intention to sell your property. Always remember the longer the period you used your CPF-OA fund to pay off a property, the lesser the cash return you will get back when you sell off the property.

  4. You do not have an intention to buy the 2nd property without disposing your 1st property. You probably need cash for a downpayment, and 2nd property will impose Additional Buyer Stamp Duty (ABSD).

  5. If your biggest monthly cashflow out is the mortgage, you can fall back to use your CPF-OA fund to repay your housing loan in the event you run into any financial risk. 

Key Considerations When Using CPF to Pay for Your Property

  1. You have the intention to sell your property, especially in the next 5 years. Despite the fact you will have to pay back the principal sum and accrued interest, these CPF assets can still be used in your next property. Understand how leverage works, and using CPF funds to pay off the debt could be one of the best options while you free up your cash for other investments to build your wealth. However, you must have a good saving plan or budget to ensure you have enough cash assets.

  2. Start investing! The best way to invest money in whichever way works best for you. To figure that out, you will want to consider your budget, risk tolerance, and what investment options you prefer.

  3. If you do not have enough cash to start with, definitely CPF fund is a good source to start with as buying a home or invest in property is not always at the right timing. However, if you still want to build on your CPF funds, there are many ways to do it. 
    • If possible and you can afford it, try not to take on any housing grants. Nothing is free, and these grants need to be returned to your CPF when you sell the property. You will have to return the HDB grant amounts to your CPF-OA. Additionally, the housing grants you will have to return include a 2.5% accrued interest.
    • You can choose to make a refund to your CPF account without selling your property via the Voluntary Housing Refund. By making a voluntary housing refund, you reduce the amount you need to return to your CPF account when you sell your property. The refunded amount will also start earning attractive CPF interest to boost your CPF savings for retirement. Reducing the amount you would need to return to your CPF account means you may receive more cash proceeds upon the sale of your home. Which you can help to pay for any required cash outlay when you buy the next property
    • You can do Voluntary Contribution (VC) and the Retirement Sum Topping-Up (RSTU). CPF VC is where you contribute to your Ordinary Account (OA), Special Account (SA), and MediSave Account (MA). These additional funds you contribute will allow you to earn the prevailing guaranteed CPF interest rates. RSTU is meant to help you boost your retirement adequacy by allowing you to top-up your own CPF SA. These monies will contribute to your retirement sum and will be used to provide monthly payouts under the Retirement Sum Scheme or CPF LIFE once you reach your Payout Eligibility Age. However, it is worth noting that only top-ups made under the Retirement Sum Topping-Up Scheme and Voluntary Contributions specifically to the MediSave Account are tax-deductible.


If servicing your monthly mortgage using cash appears too difficult, it should be the discretionary spending that needs to be sacrificed and not the money in your CPF, which is meant for your retirement. However, using CPF fund to make payments whenever possible also allow you to build up your wealth portfolio. CPF fund can always be a voluntary top-up and still enjoying some tax relief. 

Just remember, retirement goals can also be funded using cash or other forms of investment, it needs not to be relied mostly on using CPF. The most important is you must know your net worth and cash flow statements, so you know how to utilize all your income sources to build on your wealth for retirement!

Related Posts:

Part 1: Should You Sell Your HDB Flat

Part 2: Should You Use Cash or CPF to Pay for Your Home

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