Paying Your Home Loan With Cash or CPF: Which Is the Smarter Choice Today?
- Stuart Chng
- Dec 23, 2025
- 6 min read
Is Paying Down Your Home Loan By Cash Or CPF A Better Option Today?
Whether you own an HDB flat or a private property, you can service your monthly mortgage using:
Cash
CPF Ordinary Account (OA)
Or a combination of both
At first glance, many people assume CPF should always be used since “cash is king” and CPF feels like locked-up money. In reality, the decision is more nuanced—and the choice you make can significantly affect your upgrading plans and long-term wealth.
Why Some Homeowners Prefer Paying Their Loan With Cash
One key reason homeowners choose to use cash instead of CPF is to avoid what’s known as a negative cash sale when selling their property.
What Is a Negative Cash Sale?
This happens when most (or all) of your sale proceeds must be refunded to CPF, leaving you with little or no cash for your next property purchase.
A Simple Example
Purchase price: $350,000
CPF used for down payment: $70,000
Monthly mortgage paid using CPF over 5 years: ~$1,120
Total CPF used (principal): ~$137,200
When you sell the property after five years, you must refund:
CPF principal used
Plus accrued interest at 2.5% per annum
This can easily amount to $155,000 or more.
If you sell during a softer market and your net proceeds are only $150,000 after costs, all of it goes back to CPF, leaving you with no cash on hand—even if the buyer paid cash for part of the purchase.
This situation affects both HDB and private property owners.
While some would argue that you can use the refunded CPF for your next home, there are people whom I have met who did not have sufficient cash savings and ended up not being able to proceed with their private property upgrading plans.
As such, some buyers prefer to service their loan in full cash to prevent a negative sale situation from affecting their upgrading budget later on.
Quick Reference: For a private property purchase, the first 5% must be paid in cash, and the next 20% can be covered by CPF. The combined 25% is the absolute minimum down payment on any purchase. Buyer stamp duties of 3-4% (depending on purchase price) would also have to be paid for in cash before it is refunded by CPF.
Why This Matters for Property Upgraders
While CPF refunds can technically be used for your next home, many buyers still need:
Cash for the first 5% down payment (mandatory for private properties)
Cash to cover buyer’s stamp duties upfront
Liquidity for renovation, furnishing, or emergency buffers
I’ve met homeowners who had sufficient CPF but lacked cash—and were forced to delay or abandon their upgrading plans as a result.
This is why some homeowners deliberately service their loans fully in cash to preserve future flexibility.
CPF Accrued Interest: A Silent Factor Many Overlook
The longer you hold a property while using CPF, the more accrued interest compounds.
After 10 years or more, the CPF principal plus interest can grow into a surprisingly large sum. While CPF shortfalls can sometimes be waived if sale proceeds are insufficient, relying on this is never ideal and requires legal appeals.
On the flip side, CPF offers something extremely valuable.
CPF as a Risk-Free Growth Tool
CPF OA earns:
2.5% risk-free interest
Up to 3.5% on the first $20,000
Very few investments globally offer guaranteed, compounding, risk-free returns at this level.
Some homeowners therefore prefer to:
Pay housing loans with cash
Preserve CPF for long-term, inflation-hedging growth
Or transfer OA funds to Special Account (SA) for 4%+ risk-free returns
For those who prefer defensive, disciplined financial planning, this approach can be very effective.
But Don’t Ignore the Importance of Cash Flow
That said, paying everything in cash isn’t always ideal.
Although the popular belief is that "cash is king", cash in the wrong hands can make a pauper.
Having zero cash reserves can:
Force you to rely on personal loans or credit lines
Expose you to high interest rates (often 6–9% p.a.)
Prevent you from seizing time-sensitive investment opportunities
Cash on hand creates optionality—whether for emergencies, investments, or early entry into another property purchase. In many cases, property investments can deliver higher long-term returns on equity compared to CPF alone.
Balance is key.
And I tell you this from witnessing my mum's experience with her CPF funds (which became the catalyst for my entrance into real estate to solve our financial difficulties).
So, Should You Use Cash or CPF?
Paying With Cash May Suit You If:
You plan to upgrade in the near to mid-term
CPF forms the backbone of your retirement strategy
You prefer conservative, disciplined financial planning
Using CPF May Be Better If:
You want to maintain strong cash liquidity
You actively invest and manage opportunities
You have sufficient buffers and long-term plans in place
Usually though, it is not advisable to pay all your instalments in cash as it is equally crucial to set aside rainy day funds or an opportunity fund to take advantage of investment opportunities.
If you have nothing in the bank, that can mean turning to personal loans or lines of
credit, which incur a costly interest of 6-9% per annum. This defeats the purpose of trying to grow your CPF, and can derail your upgrading plans.
Additionally, having more cash on hand allows you to invest in subsequent properties earlier in your lifetime, which typically delivers superior long term returns on equity than CPF does. Read: ROE vs ROI – An Important Factor that Property Investors Overlook
Final Thoughts
There is no one-size-fits-all answer when it comes to paying your home loan with cash or CPF.
The right decision should be based on:
Your upgrading timeline
Your cash reserves
Your risk tolerance
Your long-term retirement and investment strategy
Before making a major shift, it’s wise to speak with a Property Wealth Planner who can help you weigh opportunity costs and align your housing decisions with your broader financial roadmap.
Making the right choice today can significantly shape your financial flexibility tomorrow.
Need an opinion on your property investment plans, the best buys available or help marketing your properties?
Get a 1-time free 30 min Property Wealth Planning consultation with Stuart and his team of Property Wealth Planners. Schedule one right now.
A PWP consultation includes:
- An in-depth financial affordability assessment and timeline planning
- Highly relevant investment insights
- A clear and customised investment road map
- A curated list of best buys in today's market with good growth potential & minimal risks
- Selecting units with the highest potential in a new launch project
- Advice on marketing and getting a buyer for your property fast
- Has your property stagnated in price? What options do you have?
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 different real estate agencies in Singapore. Read his agents' reviews here.
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