HOME FINANCING MATTERS – CPF rules

http://property.st701.com/articles/view/309

HOME FINANCING MATTERS – CPF rules
By Goh Mei Yi
Published: November 23 2007,
CATS Classified in The Straits Times

Using your CPF savings to pay for a property is not such a simple matter. There are three types of CPF limits on mortgage repayment that homeowners should be aware of – Valuation Limit, Available Housing Withdrawal Limit and Withdrawal Limit.

This is how they will affect you as a home buyer:

You will reach the Valuation Limit when the CPF savings used for mortgage repayment are equal to the purchase price or the valuation of the property, whichever is lower.

When you have reached 100 per cent of the Valuation Limit, you can still use your CPF savings to pay for the loan, and the amount you can use is known as the Available Housing Withdrawal Limit (AHWL).

You will be informed by the CPF three months before you reach the Valuation Limit and the AHWL becomes applicable.

To calculate your AHWL, you first have to put aside half of the Minimum Sum in your CPF account. Whatever balance is left becomes the AHWL.

From Jul 1 this year, the Minimum Sum is $99,600, so you have to first set aside $49,800 in your Ordinary Account and/or Special Account (including the amount used for investment) before you can use any excess CPF savings.

The AHWL is subject to a cap, which is the Withdrawal Limit. Since January 2003, homeowners have been subject to a cap on the CPF savings that they can use for the mortgage if buying a private property, or refinancing an HDB loan with a bank, or buying an HDB flat with a bank loan. New HDB flats bought with an HDB concessionary loan are not subject to the withdrawal limit.

The Withdrawal Limit is now 126 per cent of the valuation limit. The rate of 120 per cent will apply from 2008 onwards.