How Can HDB Upgraders Minimise the Impact of CPF Accrued Interest?

Many first-time home sellers in Singapore are at a loss on realising that their net profits from the sale of HDB flat are eaten up by accrued interest on CPF. Here's everything about CPF accrued interest and how HDB upgraders can minimise the impact of accrued interest:

Accrued Interest in CPF

Accrued interest is basically the interest you would have earned if you didn't withdraw your CPF savings to purchase a house. It is inclusive of all the funds withdrawn from the CPF Ordinary Account for the down payment and monthly instalments of your home.

Calculation of CPF Accrued Interest

In simple words, CPF accrued interest is the interest you would have earned if you kept the funds in CPF OA. Accrued interest is calculated at 2.5% per annum. 

For example, if you withdraw $200,000 and choose to be an HDB upgrader by selling your HDB flat after the MOP of five years, the accrued interest amount you need to pay back is:

$200,000 x 2.5% x 5 years= $25,000

So, the total amount you need to repay as an HDB upgrader is $125,000.

 

Ways HDB Upgraders Can Minimise the Impact of CPF Accrued Interest on Their Earnings

• Make a partial/full repayment to CPF

HDB upgraders can easily minimise the burden of accrued interest by repaying and topping their CPF account whenever possible.

• Using cash

Pay in cash if you have sufficient funds. This will save HDB upgraders from paying accrued interest in the future.

• Seek professional help

A professional can help an HDB upgrader to help figure out the right time to sell the property, the ins and outs of CPF and accrued interest, and how to get the best value for their home.