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A Detailed Look into How CPF Accrued Interest Affects Your Cash Proceeds

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In Singapore, who doesn’t use their CPF monies to buy their house right? Majority of us will indefinitely use our CPF monies to fund the purchase of a house, whenever possible. However, are you aware of how usage of CPF and it’s accrued interest will affect your cash proceeds overtime?

CPF Accrued Interest On Property

A little more on CPF accrued interest when you utilise CPF for your property.

CPF accrued interest is the amount of interest you would have earned if kept in you CPF account. The interest rate is in reference to the CPF Ordinary Account interest rate, currently pegged at 2.5% per annum, and it is compounded yearly.

However, when you withdraw the CPF to use for your property purchase, interest will still accrue on the principal amount yearly, not within the CPF account though, and you are required to refund the accrued interest, together with the principal amount used, back to you CPF Account upon the release of your interest on the property.

Meaning to say, instead of accumulating interest from your CPF accounts, these interests are accumulated via your sales proceeds instead. For better understanding, we have drawn out two scenarios below.

Case Studies

Case study on how CPF affects cash proceeds.

John and Mary purchased a BTO directly from HDB at $330,000 and in total used $100,000 CPF monies for their purchase. The balance of $230,000 will be funded by HDB mortgage loan at an interest of 2.6% for 25 years, with a monthly mortgage of $1050. Stamp Fees and legal fees work out to be $5200 also paid with CPF. 5 years down the road, John and Mary decided to sell their flat upon Minimum Occupation Period (MOP) at the market rate of $500,000.

Base on Amortisation Table below, their outstanding loan on the 5th year will be $196,350.15.

Amortisation Table 5 Years Outstainding Loan
Courtesy of Mortgage Calculator App

All above factors will be constant except that for Scenario A, John and Mary uses CPF for their monthly mortgage repayment whereas in Scenario B, John and Mary uses cash to pay for their mortgage.

Scenario A: Using CPF For Monthly Mortgage

5 Years Projectiong How CPF accrued interest affects Cash Proceeds with CPFrepayment
Table A

Let’s look at Table A above, on the 5th year, John and Mary would have withdrawn a principal amount of $182,350.86 CPF monies with an accrued interest of $18,709.63. The total amount $201,060.49 should be refunded upon sales of their flat.

There cash proceeds will work out to be:
$500,000.00 – $196,350.15 – $201,060.49 = $102,589.36
(Sales Price – Outstanding Loan – CPF Accrued with Interest = Cash Proceeds)

Total asset on hand after selling:
(i) CPF Refunded: $201,060.49
(ii) Nett Cash Proceeds: $102,589.36

Read More: Guide to Calculate Property Sales Proceeds


Scenario B: Using Cash For Monthly Mortgage

5 Years Projection How CPF accrued interest affects Cash Proceeds with cash repayment
Table B

Base on the Table B above, on the 5th year, John and Mary would have used a principal amount of $116,121.12 CPF monies with an accrued interest of $13,824.14. The total amount $129,945.26 should be refunded upon sales of their flat. At the same time, the CPF fund not utilised for mortgage payment are kept in their CPF account accumulating interest, amounting to $71,115.22 (Table C below).

5 Years Projection on CPF Savings
Table C

Their cash proceeds will work out to be:
$500,000 – $196,350.15 – $129,945.26 = $173,704.59

After reducing the cash outlay of $63,000 (1050 x 60 mths) for mortgage payment for 5 years, cash proceed netts at $110,704.59.

Total asset on hand after selling:
(i) CPF Refunded: $129,945.26
(ii) CPF Unutilised in CPF Account: $71,115.22
(iii) Nett Cash Proceeds: $110,704.59
(iv) Forced Savings in Cash: $63,000.00


Comparing Scenario A and B

Just a difference of paying their mortgage in cash allows John and Mary to reap an extra nett cash proceeds of $8,115.23 and a forced savings of $63,000 in cash. CPF asset remains the SAME in both scenarios.

How CPF Affects Your Cash Proceeds in the Long Run?

Now, let us revisit the scenarios again, say John and Mary only decide to sell their flat 10 years after they gotten their keys this time and their flat’s price has depreciated to $450,000.

Base on Amortization table below, their outstanding loan amount stands at $156,796.77.

Scenario A: Using CPF For Monthly Mortgage

10 Years Projection How CPF accrued interest affects Cash Proceeds with CPFrepayment
Table (i)

Referring to Table (i) above, the amount required to be refunded back to CPF account will be $320,699.56. Base on a selling price of $450,000, nett cash proceeds will be -$27,496.33, meaning to say a (CPF) loss of $27,496.33.

At this instance, there will be $0 Cash Proceeds.

Total assest on hand after selling:
(i) CPF refunded: $293,203.23
(i) Nett Cash Proceeds: $0


Scenario B: Using Cash For Monthly Mortgage

10 Years Projection How CPF accrued interest affects Cash Proceeds with cash repayment
Table (ii)

Now let us look at Table (ii), John and Mary will be required to refund $160,845.27 back to their CPF account. Their unused CPF would have accumulated $159,854.29 (including accrued interest) in their CPF ordinary accounts base on Table (iii) below.

10 Years Projection on CPF Savings
Table (iii)

Their gross cash proceeds turns out to be $132,357.96, and nett cash proceed is $6,357.96 after reducing the cash outlay of $126,000 paid on mortgage for 10 years.

Total asset on hand after selling:
(i) CPF refunded: $160,845.27
(ii) CPF Unutilised in CPF Account: $159,854.29
(iii) Nett Cash proceeds: $6,357.96
(iv) Forced Savings in Cash: $126,000.00


Comparing Scenario A and B

In scenario B, John and Mary did not suffer any CPF loss and hence reaped an additional $27,496.33 in their CPF Account. At the same time, they have an additional nett Cash Proceeds of $6,357.96 together with a forced savings of $126,000 cash on hand after selling their flat.

CPF Accrued Interest Calculator

If you would like to do your own planning on your usage of CPF on your property, you can download our in-house CPF Accrued Interest Calculator here.

Note: Download and usage of the calculator is solely for own use. Information derived and presented are base on an estimate and projection and cannot be taken as the actual figure. We will not be responsible for any inaccuracies or losses thus incurred.

Final Thoughts

In general, the more CPF monies withdrawn to fund for your property over a longer period of time may be a killer to your property cash proceed.

On different case to case situations, it may not be a bad idea to use more CPF instead of Cash, if the cash on hand can reap you a higher returns in term of opportunity costs.

We recommend you to take a step back and have a strategic view on your CPF usage and property planning so as to achieve the most optimal CPF usage amount and Cash Proceeds returns.

Read more on property news, resources and useful content like this article at SGHousez’s article section.

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