CPF Accrued Interest: Will It Come Back to Haunt You When You Use It for Property?
- Stuart Chng
- Dec 29, 2025
- 5 min read
Updated: Jan 9
In recent months, there have been growing discussions around the long-term impact of using CPF funds to finance property purchases. Some articles even suggest that HDB owners should sell early and move into private properties to avoid a so-called “negative sale” outcome—where homeowners walk away with little or no cash after selling their homes.
At the heart of this concern lies one concept: CPF accrued interest.
So how real is this risk, and should property owners be worried? Let’s break it down in a practical and easy-to-understand way.
Key CPF Rules You Need to Know
Before analysing the issue, it’s important to establish a few fundamental CPF facts:
Funds in your CPF Ordinary Account (OA) earn 2.5% interest per annum
Once CPF monies are used for a property, those funds stop earning interest
Upon selling the property, you must refund the CPF principal used plus the accrued 2.5% interest
Sale proceeds are distributed in this order:
Bank loan repayment first
CPF refund second
Any remaining balance is returned to you in cash
This discussion focuses only on the OA interest; additional CPF interest and Special Account returns are intentionally excluded
With these rules in mind, let’s examine how CPF accrued interest can affect property owners in real life.
When CPF Accrued Interest Becomes an Issue
Because CPF interest compounds over time, some homeowners may face a situation where most or all of their sale proceeds go back into CPF, leaving little or no cash on hand.
This becomes problematic if the owner intends to buy another property and lacks sufficient cash savings.
In short, you could end up CPF-rich but cash-poor.
For example, when purchasing a property in Singapore, buyers are required to pay at least 5% of the purchase price in cash. For a $1 million home, that means $50,000 in cash, before CPF funds can be used or a bank loan drawn.
A Practical Example
Consider a married couple who purchased an HDB flat 20 years ago.
CPF used for down payment: $200,000
CPF used over 20 years for loan servicing: $200,000
Total CPF utilised: $400,000
If they sell their flat today for $530,000, the proceeds may be insufficient to fully refund the CPF principal plus accrued interest. As a result, they receive no cash proceeds at all.
Why does this happen?
Because the bank is paid first, CPF comes next, and only any remaining balance is returned to the seller.
In this scenario, CPF absorbs everything after the bank repayment.
Long-Term Property Appreciation
Over a 20-year holding period, most properties experience capital appreciation, which often results in sufficient proceeds to generate both CPF refunds and cash surplus—unless the property:
Has a very short remaining lease
Has depreciated significantly due to other factors
2. CPF Accessibility at Age 55
A couple who had $200,000 in CPF in their early 30s would typically be in their early to mid-50s after 20 years. At age 55, CPF withdrawals become possible, reducing the urgency for immediate cash—although waiting that long to upgrade is usually not ideal.
With proper financial and property planning, the 5% cash requirement should not become a major obstacle.
When Zero or Low Cash Proceeds Usually Occur
Negative or zero-cash sale situations typically arise due to:
Poor property appreciation
Forced sales during market downturns
Financial distress
Additional equity loans increasing outstanding debt
These are often planning issues rather than CPF issues alone.
Another Common Scenario
Suppose the same couple sells their HDB and aims to buy a $1.2 million condominium.
Minimum cash required: $60,000 (5%)
Despite having over $400,000 refunded to CPF, they lack the necessary cash
The purchase cannot proceed due to insufficient liquidity
This again highlights the CPF-rich, cash-poor dilemma.
The bottom-line is, the longer you have used your CPF for a property, the less cash proceeds you will get back when you finally sell. Even after you have fully paid off your home, CPF accrued interest is still accumulating in the background.
The Real Bottom Line
The longer CPF funds are used for property financing, the less cash you are likely to receive upon sale.
However, homeowners who:
Save cash consistently
Hold properties over longer periods
Purchase assets with reasonable growth potential generally do not face major issues.
For those planning to own multiple income-generating properties, starting earlier in life provides greater flexibility—both in terms of cash flow and loan capacity.
And to answer the underlying concern: yes, property remains a viable long-term wealth-building tool when aligned with Singapore’s regulatory framework and macroeconomic outlook.
The key lies in understanding the rules, planning ahead, and structuring your finances wisely.
Recommended additional readings:
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Stuart Chng, Executive Group District Director at Huttons, is a renowned leader and personality in the real estate industry.
He adores music and can play a few instruments decently without upsetting his neighbours. When not doing so, he enjoys pillow fighting with his son and coming up with silly puns which barely amuses his wife.
Professionally, he is a licensed real estate agent, an avid stocks, options and real estate investor, business owner, team leader, speaker and columnist for several property newsletters and blogs and is often quoted in media interviews on 938FM, Channel 8, PropertyReport, PropertyGuru and other publications.
Throughout his career, he has helped many clients grow their wealth through selecting great property investments and managing their portfolios actively. Read his clients' reviews here.
Stuart has also coached many top million dollar producing agents from top real estate agencies in Singapore. Read his agents' reviews here.
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