Paper 2 · Section 4.8

Finance & Calculations

Last reviewed: 2026-06-04 · Verify policy details against official sources before exam.

Personal study notes. Not professional, legal, financial, tax, or investment advice. Verify all rules and rates against the official Singapore agency (CEA, IRAS, HDB, URA, MAS, SLA, CPF Board) before relying.

📖 Related in-depth guides

LTV · MSR · TDSR · HDB vs Bank Loan · CPF Usage · Contra Facility · HPS

4.9aHDB Concessionary Loan vs Bank Loan

Feature	HDB Loan	Bank Loan
Max LTV	75% (wef 20 Aug 2024)	75% (no existing loans) / 45% (1 loan) / 35% (2+ loans)
Min Cash Down	None — 100% CPF allowed	Min 5% cash; up to 20% CPF
Interest Rate	Fixed 2.6% p.a. (CPF OA rate + 0.1%)	Floating, SORA-pegged (lower initially)
Max Tenure	25 years (or until youngest buyer turns 65)	30 years (or until age 65)
MSR (30%)	Applies	Applies (for HDB/EC purchases only)
TDSR (55%)	Not applicable to HDB loans	Applies to all bank property loans
HPS Required	YES — compulsory	No (arrange own insurance)
Eligibility	HDB eligibility + income limits apply	All buyers; stricter credit assessment

4.9bBank Loan LTV — Impact of Existing Loans

Existing Property Loans	Max LTV	Min Down Payment
0 (no existing property loans)	75%	5% cash + up to 20% CPF
1 existing property loan	45%	25% cash + up to 30% CPF
2 or more existing property loans	35%	25% cash + up to 40% CPF

4.9b★Bank Loan LTV — Age & Loan Tenure Impact

The maximum LTV for a bank loan is also affectedby the borrower's age and loan tenure — not just the number of existing loans. Two conditions must both be met to qualify for the standard higher LTV:

①Loan tenure ≤ 30 years
②Loan fully repaid before borrower turns 65

If either condition is NOT met, the LTV is reduced.

Loan	Conditions met (≤30yr + repay by 65)	Conditions NOT met	Min Cash Down
1st property loan	75%	55%	5% (met) / 10% (not met)
2nd property loan	45%	25%	25%
Non-individual (company)	15%	15%	85% cash

Worked Examples

Ms Soo, age 36 — buying 1st property, wants 30-year loan:

36 + 30 = 66 (repays past 65) → Condition ② not met → LTV = 55%

36 + 25 = 61 (repays by 65) → Both conditions met → LTV = 75%

Mr & Mrs Ng, age 42 — buying 2nd property, 2nd loan:

42 + 20 = 62 (≤30yr + by 65) → Both conditions met → LTV = 45%

42 + 25 = 67 (repays past 65) → Condition ② not met → LTV = 25%

4.9cMSR vs TDSR — Key Differences

MSR — Mortgage Servicing Ratio

Cap: 30% of gross monthly income

Covers: Property loan repayment only

Applies to: HDB flats & ECs only

Both HDB and bank loans

TDSR — Total Debt Servicing Ratio

Cap: 55% of gross monthly income

Covers: ALL monthly debts (mortgage + car + personal + credit cards)

Applies to: All bank property loans

Does NOT apply: HDB concessionary loans

Buying HDB with bank loan: BOTH MSR (30%) and TDSR (55%) apply. MSR is the binding constraint — effectively limiting you to 30% for the property loan alone.

TDSR Interest Rate Assumptions (Stress Test)

Residential Loans

stress test rate p.a.

Commercial / Industrial Loans

stress test rate p.a.

MAS requires banks to apply these floor rates when computing TDSR — regardless of the actual loan rate offered. Residential floor raised from 3.5% to 4% wef 30 Sep 2022.

TDSR Exemption — Refinancing

→Owner-occupied property: No TDSR check required when refinancing

→Investment/non-owner-occupied property: TDSR applies on refinancing — unless the borrower has a debt reduction plan: commit to min 3% loan repayment per year for ≤3 years + FI credit assessment

4.9dCPF Ordinary Account — Property Usage

CPF OA can be used for:

✓ Down payment (HDB: up to 100%; bank loan: up to 20%)
✓ Monthly mortgage instalments
✓ BSD and ABSD
✓ Legal fees and conveyancing costs

CPF restrictions:

✗ Cannot be used if remaining lease <60 years
✗ CPF withdrawal limited for short-lease properties
✗ Must be refunded on sale (principal + 2.5% p.a. interest)

On sale — CPF must be refunded to your CPF OA with accrued interest at 2.5% p.a. This reduces your cash proceeds from the sale.

CPF Withdrawal Limit (Bank Loan Only)

For properties purchased with a bank loan, total CPF usage is capped at 120% of the Valuation Limit (VL) — where the VL is the lower of purchase price or market valuation. This applies to both HDB and private properties purchased with a bank loan.

Valuation Limit (VL) = Lower of (purchase price, market value)

CPF Withdrawal Limit = 120% × VL

CPF Usage — Lease Requirement Decision Tree

① Remaining lease ≥ 20 years?

→ No: Cannot use CPF at all

→ Yes: Check ② remaining lease + age of youngest buyer ≥ 95?

→ Yes to both: Can use CPF up to Valuation Limit (full)

→ No (lease + age < 95): CPF usage is pro-rated ↓

Pro-Rated CPF Withdrawal Limit Formula

Pro-rated % = (Remaining lease − 20) ÷ (95 − Age of youngest buyer − 20)

Pro-rated CPF limit = Pro-rated % × Valuation Limit

Example 1 — Buyer aged 45, remaining lease 50 years, VL = $800,000

Pro-rated % = (50 − 20) ÷ (95 − 45 − 20) = 30 ÷ 30 = 100% → Full VL = $800,000

Example 2 — Buyer aged 50, remaining lease 40 years, VL = $600,000

Pro-rated % = (40 − 20) ÷ (95 − 50 − 20) = 20 ÷ 25 = 80% → CPF limit = $480,000

Example 3 — Buyer aged 55, remaining lease 30 years, VL = $500,000

Pro-rated % = (30 − 20) ÷ (95 − 55 − 20) = 10 ÷ 20 = 50% → CPF limit = $250,000

Key figures: 20-year minimum lease; 95-year combined threshold for full CPF access.

Why Only CPF OA — and Retirement Sum Significance 2027 · Explicit · 4.8.10 / 4.8.11

① Why each CPF account exists — and why only OA can fund housing

Account	Purpose	Housing?
Ordinary Account (OA)	Housing, education, investment	✓ Yes
Special Account (SA)	Retirement savings — preserved for old-age income	✗ No
Retirement Account (RA)	Created at 55 from SA + OA → CPF LIFE payouts	✗ No
MediSave Account (MA)	Healthcare — hospitalisation, MediShield Life premiums	✗ No

SA / RA / MA are ring-fenced because Singapore's retirement & healthcare framework depends on those balances staying intact. Only OA is designated for housing.

② Who can use CPF OA for a property purchase

The purchaser(s) named in the OTP / S&P — sole or joint buyers
Authorised Essential Occupiers for HDB flats (where HDB scheme permits)
A non-owner cannot use their CPF OA to fund a property they do not co-own

③ Full / Basic Retirement Sum (FRS / BRS) — significance for housing

BRS (Basic Retirement Sum) — half of FRS — yields a smaller monthly CPF LIFE payout. To withdraw OA above the Withdrawal Limit (after 55), the member must set aside at least BRS in RA, supported by a property pledge.
FRS (Full Retirement Sum) — double the BRS — yields the standard CPF LIFE payout. Setting aside FRS in RA gives full flexibility on OA usage.
ERS (Enhanced Retirement Sum) — up to four times BRS — for higher CPF LIFE payouts.
CPF Board publishes BRS / FRS / ERS values that increase each year. RES are not expected to memorise the exact dollar figures; you must understand the concepts and direction of impact on housing usage.

④ Short-lease / 95-year shortfall — CPF Housing Withdrawal Limit recap

Remaining lease < 20 years → cannot use CPF at all.
Remaining lease + age of youngest buyer ≥ 95 → may use CPF up to full Valuation Limit.
Otherwise → CPF use is pro-rated by the formula in the decision tree above.
This rule protects retirees from over-committing CPF to a property whose lease will not last their lifetime.

4.9eHome Protection Scheme (HPS)

What HPS covers

→ Death of insured member
→ Permanent incapacity
→ Terminal illness

HPS pays off the outstanding HDB loan balance, so the family keeps the flat.

HPS requirement

Compulsory for all HDB Concessionary Loan borrowers using CPF.

Not required for bank loan borrowers (they arrange their own mortgage/life insurance).

4.9fHDB Enhanced Contra Facility

Allows HDB flat sellers to use proceeds from selling their existing flat to fund the purchase of their new HDB flat simultaneously — avoiding the need for a bridging loan.

Old Flat Loan	New Flat Loan	Contra Available?
HDB Loan	HDB Loan	✅ Yes
HDB Loan	No Loan (cash purchase)	✅ Yes
HDB Loan	Bank Loan	❌ No

4.9gFinancial Calculator — CMPD Mortgage Calculations

The RES exam requires use of a financial calculator (e.g., Casio FC-200V) to calculate monthly mortgage payments. The CMPD function (Compound Interest Computation) uses five variables:

Total payment periods (months × years for monthly payments)

Annual interest rate — enter as a number (e.g., 4.5 for 4.5% p.a.)

Present Value = loan amount — enter as NEGATIVE

PMT

Monthly payment — this is what you solve for

Future Value = 0 (loan fully repaid at end)

P/Y

Payments per year = 12 (for monthly repayments)

Worked Example

Loan: $500,000 at 4% p.a. for 25 years (monthly repayments)

n = 25 × 12 = 300

I% = 4 (enter 4, not 0.04)

PV = −500,000 (negative — loan is a liability)

FV = 0

P/Y = 12

Solve for PMT → ≈ $2,639 / month

Check: $2,639 × 12 / $8,000 gross income = 39.6% → passes TDSR (55%) ✓

→ Always set P/Y = C/Y = 12 for monthly payment calculations

→ Enter PV as a negative number (cash outflow to acquire the loan)

→ After solving PMT, verify: PMT ÷ gross monthly income ≤ 30% (MSR for HDB/EC) or ≤ 55% total debt (TDSR for bank loans)

🎯

Section Quiz

4.9 — Property Finance & Calculations

10 questions · 90 seconds each · exam-style difficulty

Rules: Time runs out → question is marked wrong. Read carefully — options are designed to trap you.

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