Navigating the HDB Resale Journey with Confidence

Acquiring a resale Housing & Development Board (HDB) flat in Singapore represents a pivotal financial decision for many. The process is marked by significant emotional and practical considerations, but it is the financial complexities—particularly the use of Central Provident Fund (CPF) savings—that can be most daunting. A clear understanding of the rules governing CPF usage, property valuations, and loan options is not merely an advantage; it is a necessity for making a sound and confident purchase. This guide provides a comprehensive overview of the financial landscape for HDB resale buyers, transforming a potentially overwhelming process into a clear and actionable journey. By focusing on the intricacies of valuations, loan structures, and specific policy rules, this analysis serves as a definitive roadmap for navigating the HDB resale market with financial prudence and foresight.

The Financial Compass: Decoding the HDB Valuation and CPF Rules

The official valuation of a resale HDB flat is the cornerstone of its financial transaction. It is this figure, determined by HDB, that dictates the maximum amount of CPF savings that can be used and the extent of any housing loan, whether from HDB or a bank. Without a clear grasp of this valuation process, a buyer’s financial planning is based on incomplete information, potentially leading to unforeseen cash outlays.

The Request for Value Process: Your Step-by-Step Guide

The journey to an official valuation begins with a formal submission known as the Request for Value. This step is mandatory for any buyer intending to use their CPF Ordinary Account (OA) savings or a housing loan to finance the purchase. The process is highly time-sensitive and requires careful adherence to the official HDB protocol.   

The initial and most critical prerequisite is that the buyer must possess a valid HDB Flat Eligibility (HFE) letter before the seller can grant an Option to Purchase (OTP). The HFE letter serves as a preliminary financial check, confirming a buyer’s eligibility for a flat purchase, CPF housing grants, and an HDB loan, streamlining the subsequent steps. Once a purchase price is mutually agreed upon with the seller, the OTP is granted, initiating a 21-day Option Period.   

The submission of the Request for Value must occur by the next working day following the date the OTP was granted. This tight deadline highlights the high-stakes, time-sensitive nature of the commitment. It means that the buyer’s financial planning and research, including an estimation of the flat’s market value based on recent transaction data, must be completed   

before the OTP is even signed. A fee of $120 (GST inclusive) is payable to HDB for this request. The request, along with a scanned copy of the first page of the OTP, is submitted via the HDB Flat Portal.   

The outcome of the Request for Value is typically available within 10 working days. Buyers must wait for this outcome before they can exercise the OTP and proceed with the purchase. The valuation provided is valid for a period of three months, within which both the buyer and seller must submit their respective portions of the resale application.Failure to do so necessitates a new   

Request for Value and a repeat of the process.

The CPF Valuation Limit (CVL) and Its Impact

The Request for Value culminates in the HDB valuation, which directly determines the CPF Valuation Limit (CVL). The CVL is the maximum amount of CPF Ordinary Account (OA) savings that can be used for the purchase price of the flat. This limit is set at the   

lower of the purchase price or the official HDB valuation at the time of purchase.   

For instance, if a buyer and seller agree on a price of $620,000, but HDB’s official valuation comes back at $600,000, the CVL is capped at $600,000. This is the maximum amount of CPF that can be used towards the down payment and purchase price. Any amount beyond this limit must be covered by cash.

A critical nuance exists for buyers using an HDB loan or a bank loan who have already hit their CVL. They may be able to continue using CPF to service their monthly mortgage repayments up to a Withdrawal Limit (WL) of 120% of the CVL, provided they have set aside the applicable Basic Retirement Sum (BRS) in their CPF accounts. This rule is designed to ensure that CPF savings are prudently managed, balancing homeownership needs with the objective of securing a stable retirement fund.   

The Reality of Cash Over Valuation (COV)

A direct consequence of the CPF Valuation Limit (CVL) is the concept of Cash Over Valuation (COV). COV is the difference between the agreed-upon sale price and the official HDB valuation of the flat. It represents the portion of the purchase price that cannot be covered by your CPF or a housing loan and must be paid in cash.

The calculation for COV is simple:

Agreed Sale Price – HDB Valuation = COV

For example, a flat with an agreed price of $600,000 and an HDB valuation of $580,000 would incur a COV of $20,000. A fundamental rule of HDB resale is that this COV must be paid in cash. It cannot be covered by a housing loan or CPF savings.   

This financial implication is amplified by a policy change enacted in 2014, when HDB ceased publishing past COV prices. This move shifted the negotiation dynamic, forcing buyers and sellers to base their agreed price on recent transaction data rather than a known COV benchmark. The COV amount remains unknown to both parties until HDB’s valuation is returned. This uncertainty transfers the risk of a high COV from the government to the buyer, underscoring the vital importance of thorough market research and maintaining a substantial cash buffer.   

Additionally, the COV is not without its own costs. While it cannot be paid for with a loan or CPF, it is included in the calculation of the Buyer’s Stamp Duty (BSD). The BSD is calculated based on the higher of the purchase price or the valuation, meaning a buyer will pay stamp duty on the COV amount, further increasing their total cash outlay.   

Loan Options: HDB Loan vs. Bank Loan—A Strategic Choice

The decision between an HDB concessionary loan and a bank loan is a long-term strategic choice that significantly affects a buyer’s financial journey. While both options facilitate homeownership, they differ fundamentally in their down payment requirements, interest rates, and overall flexibility.

A Direct Comparison: Down Payment, LTV & Interest Rates

A direct comparison of the key financial terms reveals the trade-offs inherent in each loan type. Since a policy adjustment in August 2024, the maximum Loan-to-Value (LTV) ratio for both HDB and bank loans for resale flats has been set at 75%. This means a buyer is required to fund the remaining 25% through a down payment. However, the composition of this down payment is where the two loan types diverge.   

HDB Loan vs. Bank Loan for Resale Flats

Feature	HDB Loan	Bank Loan
LTV Limit	Up to 75% of the lower of the purchase price or valuation	Up to 75% of the lower of the purchase price or valuation
Down Payment	25%, can be paid fully with CPF or cash. No minimum cash component	25%, with a mandatory 5% cash component and the remaining 20% in CPF or cash
Interest Rate	Stable, concessionary rate currently fixed at 2.6%	Variable (e.g., SORA-pegged) or fixed for a short period, subject to market fluctuations
Use of CPF OA	Must use all available CPF OA, with the option to retain up to $20,000	Flexible; buyers can choose how much CPF to use and can substitute with cash
Loan Tenure	Maximum of 25 years	Maximum of 30 years

The most significant distinction lies in the down payment structure. The HDB loan’s allowance for a full CPF-funded down payment is a major advantage for buyers who have accumulated a substantial CPF OA balance but have limited cash savings. Conversely, the bank loan’s mandatory 5% cash component can be a significant hurdle for some buyers.This policy requirement for a cash component in bank loans is a measure to promote financial prudence, ensuring that buyers have some liquid savings to draw upon, thereby preventing over-leveraging.   

The Fine Print: Loan Tenure, Refinancing & Eligibility

Beyond the down payment, there are other crucial differences to consider. The maximum loan tenure for an HDB loan is 25 years, while banks may offer a longer tenure of up to 30 years. A longer tenure can reduce monthly mortgage repayments but will result in higher total interest paid over the life of the loan.   

The refinancing options are also fundamentally different and represent a one-way street. A borrower can refinance an HDB loan with a bank loan at any point, with no penalty for early repayment. However, once a loan is refinanced to a bank, it is   

not possible to switch back to an HDB loan. This is a critical consideration for a buyer’s long-term strategy, as it locks them into the private banking ecosystem.   

Furthermore, eligibility criteria vary. HDB loans are subject to an income ceiling, making them inaccessible to higher-income buyers who must, by default, opt for a bank loan. Banks, on the other hand, do not have an income cap and primarily assess a borrower’s creditworthiness and financial health.   

Navigating the Rules: Older Flats and the Resale Levy

Special considerations apply when purchasing an older flat or when a buyer is a second-time subsidized home purchaser. These rules, while complex, are designed to protect a buyer’s retirement savings and ensure fair allocation of housing subsidies.

The “Age 95” Rule: Pro-rating CPF for Older Flats

A major policy change enacted in May 2019 introduced a new criterion for CPF usage: the property’s remaining lease must be sufficient to cover the youngest buyer until at least the age of 95. This rule, which superseded the old “30-year lease” requirement, directly impacts the amount of CPF that can be used for a purchase.   

If the flat’s remaining lease does not meet this criterion, the amount of CPF that can be used for the purchase is pro-rated. This policy is not intended as a penalty but as a measure of financial prudence. By capping CPF usage, the government aims to help buyers retain sufficient savings for future housing needs during retirement, such as a replacement property after their current flat’s lease runs out.   

There is also a minimum lease requirement: CPF cannot be used for any property with a remaining lease of less than 20 years. This reinforces the objective of ensuring that CPF funds are not tied up in assets with a very limited lifespan.   

The Resale Levy: A Seller's Obligation, a Buyer's Awareness

The Resale Levy is a fee that applies to buyers who previously received an HDB subsidy and are now purchasing a second subsidized flat or a new Executive Condominium (EC). The amount of the levy is a fixed sum determined by the size of the first subsidized flat sold, for transactions on or after March 3, 2006.   

A critical point to note is that the resale levy cannot be paid using CPF money. It must be paid from the sales proceeds of the current flat or by cash. The order of deduction from the sales proceeds is a crucial detail for buyers to understand, as it varies based on the seller's mortgage type:   

• For sellers with an HDB loan, the sales proceeds are used to settle the outstanding loan first, followed by the resale levy, and then the CPF refund.   
• For sellers with a bank loan, the sales proceeds are used to settle the outstanding loan first, followed by the CPF refund, and then the resale levy.   

This distinction is important because the differing payment order can affect the cash proceeds available to the seller, and may necessitate a cash top-up if the sales proceeds are insufficient to cover the levy and other obligations. It demonstrates the interconnectedness of a buyer's and seller's financial circumstances in the resale process.

Case Study: Putting the Rules into Practice

To illustrate how these rules interact in a real-world scenario, consider the case of Alex and Ben, a hypothetical couple both aged 30, who are buying a resale flat in a mature estate.

• Agreed Purchase Price: $720,000
• HDB Valuation: $680,000
• Remaining Lease: 65 years (Sufficient to cover both until age 95)
• Combined CPF OA Savings: $200,000

Step 1: Calculating Cash Over Valuation (COV) 

The COV is the difference between the agreed price and the HDB valuation. This amount must be paid in cash.

• Agreed Price: $720,000
• HDB Valuation: $680,000
• COV: $720,000 - $680,000 = $40,000

Step 2: Determining CPF Usage Since the remaining lease of 65 years is sufficient to cover both buyers until age 95, their CPF usage is capped at the CVL, which is the lower of the purchase price or valuation—in this case, $680,000.However, their combined CPF OA savings of $200,000 is the ultimate limiting factor. They can use all of their $200,000.   

Step 3: Comparing Loan Options and Down Payment

• Option A: HDB Loan
  • Maximum Loan Amount: $680,000 (Valuation) * 75% = $510,000.   
  • Total Upfront Payment Required: $720,000 (Purchase Price) - $510,000 (Loan Amount) = $210,000.
  • Financial Breakdown:
    • Cash: $40,000 (COV)
    • CPF: $200,000 (Full CPF OA)
    • Total Outlay: $40,000 (Cash) + $200,000 (CPF) = $240,000. The total upfront payment required is $210,000, so they can use their full CPF and cover the COV with cash. In this scenario, they have a cash surplus and do not need a cash top-up for the down payment.
• Option B: Bank Loan
  • Maximum Loan Amount: $680,000 (Valuation) * 75% = $510,000.   
  • Total Upfront Payment Required: $720,000 (Purchase Price) - $510,000 (Loan Amount) = $210,000.
  • Financial Breakdown:
    • Cash: $40,000 (COV) + $36,000 (Mandatory 5% of $720,000 purchase price) = $76,000 minimum cash outlay. The remaining $134,000 of the down payment ($210,000 - $76,000) can be paid via CPF or cash.   
    • CPF: They can use up to their full CPF OA of $200,000.   

This case study demonstrates the fundamental difference in cash outlay between the two loan types. While the total down payment is the same, the bank loan requires a significant mandatory cash component, which could be a challenging financial commitment for some buyers. It highlights the importance of having a robust cash buffer for both the COV and the down payment, regardless of the loan type chosen.

Conclusion: Your Action Plan for a Confident Purchase

The financial process of purchasing an HDB resale flat is a layered one, governed by a set of interconnected rules that demand meticulous planning. The valuation of the flat, determined through the Request for Value, is the critical starting point that influences all subsequent financial decisions, from CPF usage to loan amounts. The CPF Valuation Limit (CVL) serves as the official cap on CPF withdrawals, while the reality of Cash Over Valuation (COV) necessitates a significant cash buffer that cannot be covered by a loan.

The strategic choice between an HDB loan and a bank loan is a personal one that should be guided by a buyer's financial profile and risk appetite. While HDB loans offer stability and no minimum cash down payment, bank loans provide flexibility and potentially longer tenures. The implications of a flat’s remaining lease and the seller's potential resale levy obligations further add to the financial complexity, reinforcing the need for buyers to be well-informed.

The ultimate takeaway for any prospective buyer is to be proactive and informed. The HDB Flat Portal and the CPF Housing Usage Calculator are invaluable tools that allow for the modeling of different scenarios before a financial commitment is made. With a clear understanding of these rules, buyers can approach the HDB resale market with confidence, making decisions that are not only financially sound but also aligned with their long-term homeownership and retirement goals.