Here’s why paying 100% CPF for your property isn’t a good idea

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When buying a property, many people in Singapore use all their CPF (Central Provident Fund) savings to pay for it. While this might seem smart, it can lead to unexpected financial drawbacks due to something called accrued interest. Let’s dive into why using all your CPF for your home isn’t the best move and explore ways to avoid losing out.

What Is Accrued Interest?

The CPF system helps Singaporeans save for retirement, healthcare, and housing. The Ordinary Account (OA) in your CPF earns interest, usually at 2.5% per year. When you use your CPF savings to buy a home, you’re borrowing from your future self. The money you use must be paid back into your CPF account, along with the interest it would have earned. This extra interest is called accrued interest.

The Problem with Accrued Interest

Accrued interest can really eat into your cash when you sell your home. Here’s a simple example: You buy a property for $400,000 using all your CPF savings. After 10 years, you sell it for $700,000. You might think you’ve made a $300,000 profit. But because of accrued interest, your actual profit is much lower.

Let’s break it down:

  • You used $400,000 from your CPF.
  • Over 10 years, at 2.5% interest, this grows to $512,000.
  • So, you need to pay back $512,000 to your CPF, not just the $400,000 you used.

This means your cash proceeds are reduced by $112,000. Instead of making a $300,000 profit, you’re left with just $188,000 after paying back the accrued interest.

How to Reduce Accrued Interest

One smart way to cut down on accrued interest is through the CPF Voluntary Housing Refund. If you have extra cash, you can pay back the amount you used for your home into your CPF account. This reduces the interest you owe and means more cash for you when you sell your property.

When to Use This Strategy

In times when interest rates for fixed deposits are higher than the CPF OA rate, people might prefer to keep their cash in fixed deposits. But when fixed deposit rates drop below the CPF OA rate, it’s better to consider the CPF Voluntary Housing Refund. This strategy can save you a lot on accrued interest, giving you more cash when you sell your home.


While using all your CPF savings to buy a home might seem easy, it’s important to understand the impact of accrued interest. By managing your CPF and cash wisely, you can reduce this impact and keep more money in your pocket. Think about using the CPF Voluntary Housing Refund and stay updated on interest rates to make the best financial decisions for your property investments.

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