Have you ever wondered how to adjust your CPF payment for a housing loan?
Our article explains how and why you can adjust your CPF payments to get ahead on your mortgage. We will also discuss the matter of legal representation plus three other alternatives to consider.
We know that everyone’s situation is different, so we’ve got all the information you need to make the best decisions for yourself.
All this information will help you save money in the long run, so keep reading below.
How Do You Use Your CPF For Paying Your Monthly Installments?
You can use CPF to pay housing loans, but did you know you can also use it to reimburse your monthly installments?
Warning: Before we begin, take note that the government advises people not to use more of their CPF than necessary.
This account will fund your retirement, so it is essential to still have enough money in there. Remember, this money is reinvested and, therefore, brings a solid compound interest.
Essentially, that’s how your CPF monies can multiply exponentially.
That aside, you may use this account to cover a home loan’s advance downpayment and pay some installments.
Remember: When purchasing your new home, keep $20,000 at the point of purchase. You can use this sum to reimburse some loan installments in times of need.
Using your CPF to pay monthly installments entails the following steps:
- First, your legal representative (aka your lawyer) must know you are planning to do this early on when sending your loan application.
- If you didn’t inform your lawyer of your plans then because you either didn’t know or didn’t have legal representation, you can always hire legal aid.
- The lawyer should write a formal letter to the CPF and your bank (if you took a bank housing loan) or the HDB (if you took an HDB housing loan).
- After getting approval, log in to the CPF website using your Singpass.
- Go to “Under my CPF” and click on “My Request”.
- Click “Property” and then “Use CPF for my Property”.
- Go to “Property details”.
- Click on “Revise Monthly Instalment”.
- Amend the installment sum and its effective date.
- Click to submit your application.
Warning: You will be expected to pay all the legal costs and processing fees your bank may ask for.
How To Make Changes To Your Monthly CPF Deductions For Home Loan
After learning how you can use your CPF account to pay your home loan in times of need, we can move on to the next step.
This section will teach you how to adjust your CPF payment for your housing loan.
- Access CPF and log in using your credentials. Use your Singpass password or scan the QR code using your mobile phone.
- After signing in, your personal portal pops up on a new screen. To the left of this screen, use your mouse to hover over “My CPF”.
- Click on Home Ownership to get to the next page.
- This page shows your property’s address.
- Scroll to get further down towards a section called “Monthly CPF deduction”.
- Follow the commands on the screen depending on the type of property you have.
- To adjust your HDB loan repayment, click on the link pointing you to the HDB website. Once you’re on that page, continue with the necessary changes.
- To adjust a private residence loan repayment, follow the commands on the screen to amend your CPF mortgage payment.
- Read the terms and conditions carefully, even if it might seem a waste of time.
- You can now submit your application.
- Save this transaction as PDF and print it for your personal documents/housing loan folder.
Why You Should Make Changes To Your CPF Housing Payments
The section above taught you how to change your CPF contribution for housing loans. But why should you do that, to begin with?
There are three main reasons:
- You’ve gotten older.
- You’ve gotten wiser.
- You’ve got no other choice.
Let’s break them down below:
You’ve Gotten Older
The law in Singapore assigns different proportions of your savings to your CPF.
Before you turn 35 years old, most of those savings enter your CPF Ordinary Account (OA).
Once the venerable age of 35 is reached, you’ll get less in your CPF OA.
Instead, most of your savings will go to your Savings Account (SA) and MediSave Account (MA). Therefore, your funds may not be enough for your loan.
In this case, the best advice is to reduce your CPF-based housing loan payments and use cash instead.
What’s the worst that can happen if you don’t do this?
If your CPF can’t cover your loan payments and you’re not taking any measures, you’ll be late with your installments.
Therefore, your loan will be topped with late penalty fees that can cause your outstanding amount to quickly snowball.
You’ve Gotten Wiser
As we said before, your CPF is essential to your retirement scheme.
You need this money to work for you, producing compound interest that ultimately increases your retirement income.
In Singapore, the retirement account doesn’t exist per se until you turn 55. That’s when CPF OA and CPF SA merge to create the Retirement Account (RA).
The monies in this account become part of CPF LIFE, Singapore’s national annuity scheme. This money covers your retirement income.
Needless to say, more money in your Retirement Account translates into higher payouts during your golden years.
So if you want to be more comfortable and have less financial worries during this exciting period of your life, you shouldn’t deplete your CPF OA.
You’ve Got No Choice
If your account’s balance is unfortunately zero, you can’t pay your bank or HDB monthly installments using your CPF OA.
In that case, the only choice you have for keeping your home is to continue making the payments using cash.
Warning: Don’t sit around waiting until this happens just because you know the system will flag you.
Even if flags are generally inspiring, this particular one is not.
So adjust your CPF payments to your housing loan before you see that zero balance.
Legal Representation For CPF And Housing Loans
As discussed in a previous section, you will need legal representation if you want to use your CPF OA to fund your loan installments.
You will need a lawyer if you pay a HDB loan using CPF or a bank loan.
This lawyer has to send a request to the CPF Board before using your CPF.
Acting on your behalf bears the name of “conveyance”. This professional service isn’t free, meaning you will have to do your research and look at different legal firms to compare quotes.
Note: Conveyancing prices also depend on the type of property you own. More expensive properties have higher conveyancing fees and vice versa.
If you want ballpark figures, look at these HDB conveyancing charges. Basically, the fee for a $500,000 apartment will be approximately $500.
Remember: If you’re buying an HDB apartment, you can use legal representation from HDB or hire another firm.
But you don’t have that option for private residential properties.
In this case, you should ideally hire a private law firm before applying for a housing loan.
Find Ways To Adjust Home Loan Installments
This article taught you how to adjust CPF payments for a housing loan. But there are different ways to change how much you pay for these loan installments.
For example, you can negotiate a longer loan tenure with the bank or the HDB. That way, you’ll pay more affordable sums each month.
If you have some money saved up, you can opt for partial mortgage repayments, therefore decreasing the outstanding loan amount.
If you decide to use your savings for partial repayments, you have two options:
- Decrease the loan term to be debt-free faster and pay a lower interest rate for the duration of your remaining loan. However, this option keeps your installments constant.
- Decrease your monthly installments by keeping the same tenure. In this case, the advantage is gaining more wiggle room with your monthly budget.
Lastly, you can contact Credit 21 for help.
As a long-standing credit provider in Singapore, Credit 21 has vast experience with different financial issues.
As such, we know how to tailor the perfect package to meet your needs, offering low interest rates and accessible installments.