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First-Time Homebuyers: How Much CPF OA Should You Use?

ByBrian

So you’re buying your first home — how much CPF OA should you use?

Buying your first place feels like a wild mix of excitement and spreadsheet anxiety. You want a roof, but you also want to retire someday. The CPF Ordinary Account (OA) is handy for reducing upfront cash and monthly loan sizes, but it’s also money that could be growing for retirement. Here’s a friendly, no-fluff guide to help you decide how much OA to tap for your home without sabotaging your future.

Keep a buffer — aim for at least $20,000 in OA

The CPF Board recommends keeping at least $20,000 in your OA. Why? It gives you breathing room for life’s curveballs — job breaks, health issues, or temporary drops in income. That $20,000 isn’t just an arbitrary safety net: at the OA interest rate it can grow meaningfully over time. For example, leaving $20,000 in the OA could grow to about $39,700 in 20 years. That’s almost double, and it buys you security.

Use a mix of cash + OA

Most first-timers benefit from a combo approach: some cash, some OA. Using OA reduces your immediate cash need and your mortgage size, but you lose future interest compounding that OA would have earned. Mixing cash and OA preserves some CPF growth while still making the home affordable today.

A quick real-world comparison

Imagine two couples taking similar loans. The maximum loan they can take is $470,000.

  • Couple A (Ben and partner) each keep $20,000 in OA — combined $40,000 stays in CPF. Their outstanding housing loan amount remains $470,000 and their shared monthly instalment works out to about $2,514.
  • Couple B (Lexie and partner) use up their OA savings toward the purchase (so $0 left). Their outstanding loan drops to $430,000 and their shared monthly instalment is roughly $2,300.

So yes, using more OA lowers your monthly payment (in this example by about $200). But Ben’s family keeps an OA buffer that could cover around 15 months of housing repayments if their cashflow gets stressed — and that’s peace of mind many people value.

Don’t forget what happens if you sell later

If you use CPF for your home, the amount you withdrew plus accrued interest must be restored to your CPF when you sell. If your sale proceeds are lower than your outstanding loan plus the CPF refund you must make, you could end up in a negative cash sale situation. That complicates upgrades or other life plans, so always plan ahead.

Use tools and rules of thumb

Quick tips:

  • Try to keep monthly mortgage payments within 25% of your gross monthly income.
  • Aim to keep housing payments within your CPF monthly contribution amount where possible — it helps free up cash for other needs.
  • Use the Home Purchase Planner (HPP) to estimate a comfortable budget and see how buying affects retirement savings.

Grants can really help — don’t miss them

Two useful grants for first-time or resale buyers are the Enhanced CPF Housing Grant (EHG) and the Proximity Housing Grant (PHG). EHG helps first-timers buying new BTOs or resale flats, while PHG supports buyers who want to live near parents or married children. These grants can reduce the amount you need from cash or OA, so factor them into your plan.

Want to keep growing CPF while paying a mortgage?

Yes — you can. Even if you use OA for housing, you can still top up your Special Account (SA) or make voluntary housing refunds later. The SA has a higher interest (up to about 5% depending on conditions) and topping up can give you tax relief (up to $8,000 annually under qualifying rules). A small recurring top-up — say $100 a month — compounded over 15 years can grow much more than simply stashing cash under your mattress. For example, saving $100 a month yourself gives you about $18,000 over 15 years; topping up your SA could grow to over $24,000 thanks to compound interest.

Thinking about CPF investments?

If you’re comfortable with risk and monitoring investments, the CPF Investment Scheme (CPFIS) lets you invest part of your CPF savings into products like government securities, bonds, T-bills, and some other options. Only consider CPFIS if you:

  • Can accept investment risk
  • Can afford to set aside the investment amount
  • Will monitor your investments regularly
  • Are confident you can earn more than the CPF interest rate

Final takeaways

1) Don’t drain your OA. Keeping at least $20,000 provides a safety cushion and long-term growth. 2) Combine cash and OA to balance short-term affordability and long-term retirement growth. 3) Use grants, the HPP tool, and consider SA top-ups to strengthen your retirement while you own a home. 4) If you’re tempted by CPFIS, be realistic about the risks and time you’ll spend managing it.

Buying a home is a major life choice, but it doesn’t have to mean sacrificing your retirement nest egg. Plan, use the available tools, and if in doubt, run the numbers with the Home Purchase Planner or have a quick chat with a financial advisor. You’ll sleep a lot better with a plan that covers both your home and your future.

Information in this article is accurate as at date of publication. Figures used are examples based on the assumptions given and are for illustration only.

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