“Should I use my CPF savings to finance my home loan repayments?”

Purchasing a home is one of the most expensive transactions that Singaporeans can make. Home ownership is an important pillar for your retirement as you can use your home as an additional source of income when you retire. As such, you have the option of using your CPF savings to finance your home loan.

In fact, more than 80% of HDB homeowners use their CPF Ordinary Account (OA) savings to service their monthly loan repayments. But is this the best option for you? Let’s take a closer look.


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1. Earn attractive interest rates

Consider using cash to finance your home loan and keeping your money in your OA to let your CPF savings grow. Savings in your OA earn up to 3.5%* interest per annum. There are very few financial products available in the market that can give you such a high, risk-free return on your investment.

2. Grow your savings with compound interest

Do you also know that your CPF savings earn compound interest? Simply put, it is interest paid on interest. Even if you make modest CPF contributions, leaving the money in your OA will allow your savings to grow exponentially over time.

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*Your OA savings earn an interest rate of 2.5% per year. The first $60,000 of your combined CPF balances, of which up to $20,000 comes from your OA, will earn an extra 1% interest per year.

1. Less cash outlay

Paying for your house with your OA savings will allow for increased flexibility and access to your cash for any sudden financial dilemmas. It will also help to have cash on hand if you are building up a liquidity buffer for big ticket items such as buying a car or going for family vacations overseas.

2. Invest your cash

Using your OA savings to repay your home loan may be the better choice if you are prepared to accept higher risk to seek higher expected returns. If you are financially savvy and have a long-term investment strategy that has the potential to outperform CPF’s interest rates – using your CPF to pay for your house may be the way to go.

Using your OA savings to finance your property is an alternative to using cash. The more OA savings you use to finance your property, the less retirement income you will have for future.

Keep in mind too that as you grow older, your contributions to your CPF accounts gradually decline. It is important to strike a good balance between financing your home and setting aside savings for retirement. Ultimately, always consider how using your CPF savings today can affect your future.