Tired of your usual environment? Do you want to add some pizzazz to your house? Something that would help you relax at the comfort of your own home and improve its functionality? Do you want to renovate that cheap old flat you bought with your home loan to fit your personality? Maybe a home renovation is ripe for the taking.
But a home renovation doesn’t come cheap. So unless you’re pretty well-off, renovation loans are right for you. This article will help you get the smarts to decide on matters all about renovation loan Singapore.
What is a Renovation Loan?
In retrospect, a renovation loan is funds borrowed from a bank solely to be used for home improvements. Banks usually offer loan customers a lower interest rate for renovation loans compared to personal loans as an asset is already present when taking up renovation loans, the house.
Whether you’ll get a tenure of 3 years or 5 years, renovation loans will definitely get you a maximum loan of six times your monthly salary while being capped at SGD $30,000.
The Average Cost of a Home Renovation
A new 3-room HDB flat with an area of 60 to 65 square meters would typically cost SGD $32,000 while a resale 3-room HDB flat would cost much more at an average of SGD $42,600. A brand new 4-room HDB flat with a bigger area of 90 square meters will eat up around SGD $42,600 while a resale of the same HDB flat will cost more or less SGD $58,500.
Know the size, type, and status of your property
The bigger your house is, the longer and costlier the home renovation project would take, not to mention more materials means the project will ultimately lead to a bigger expense, bigger than the home renovation average costs mentioned above. To get a proper ‘guesstimate’ of your final budget, you need to know what type of property you have. Is it a Condo? Is it landed? Is it an HDB?
You must not also forget to take note if your house is brand-new or resale. Resale flats are oftenly pricier to renovate due to less ideal and out of date configurations which will end up costing you up to 40% more from your renovation loans.
How to Renovate your Dream Home to Life
First, visualize your dream house. How does it look? Does it look chic, classic, modern, experimental, or something that shouts your personality? Then, should you start buying materials?
Nope, not yet. We listed the variables to consider below on how you can utilize your Renovation Loan.
1. Renovation loan restrictions
Check the restrictions first. When applying for a loan (or any other financial matter), be sure to read through the agreement thoroughly. All banks have their rights reserved and differ when it comes to restrictions, but they all have restrictions especially for purpose-specific loans such as a renovation loan.
So you better take note of which bank or moneylender would satisfy your necessities and demands while at the same time the one with interest rates you can afford with your current monthly income.
2. Consider your options
You should ask yourself this: “Is this project something I would like to be physically, mentally, and tirelessly be part of?”
If your answer is a “no” then might as well hire a professional, might be a little more expensive than doing it yourself but the outcome will surely be worth it. If you answered “yes” however, read through and I’ll give you some top-tier tips on taking a home renovation project by yourself.
As long as you hire accredited professionals for the job, that is. One particular reason why people apply for and need renovation loans is that they got ripped off by previous interior designers or contractors with no accreditation. Be vigilant.
3. Hire a professional
Here’s a tip, spend your loan wisely by hiring an Accredited Interior Designer (ID). IDs at first glance will look like an extra expense due to their rates but professionally, they are the actual experts for styling houses, innovating its functionality, and of course, translating your vision into an actual working design. Not to mention, they know which materials will fit your home best, making sure that your home renovation project is going to be an investment rather than a short-term project.
Some interior design firms even offer renovation packages. They will be the ones to hire a contractor, pick and buy the materials, plan and schedule the whole project, oversee the work being done, manage and pay the laborers, while updating you with the progress of the home renovation project.
Imagine renovating your home by just speaking to your designer, hassle-free.
4. Hiring manpower and managing the timeframe of the project
Hiring a contractor will of course be needed to help you finish your home renovation project which often will require you to be the one to schedule and manage the entire renovation process. Be prepared to handle people, oversee the daily tasks, and make sure your loan will be used fruitfully.
As we said earlier, the bigger your property is, the longer time it would take for the renovation project to finish. The longer it would take to finish, changing your mind about intricate details is more imminent which again would lead you to go over your renovation loan.
5. Actual work to be done
Scheduling tasks by phase will help you make sure that each part of the renovation process will be dealt with wisely, making sure every dollar from your total loan amount counts.
You can start with which part of the house should you work on first, which wall to repaint, which tiles to replace. Ask yourself, do you need to rewire the whole place? Will I include the exterior of the house or just the interior? Reposition the rooms? Repurpose your guest bedroom?
Keep in mind that structural alterations will cost a lot more money so be sure to keep your cool when deciding on what the main goal or focus the best renovation project for your home would have.
Make sure to plan everything ahead of time before actually spending your loan. Remember, saving time is saving money.
Factors to consider when choosing the best renovation loan
Once you have an idea on how much money you would need for your home renovation project, it is finally time to apply for a loan. Here are a few things to ponder when applying for a renovate loan:
1. Interest rates
There are typically two types of interest rate banks in Singapore offer for renovation loans, one is called a monthly rest while the other is called a flat rate.
Monthly rest is interest calculated at the beginning of every month. This type of interest rate calculates the interest depending on your outstanding principal loan amount, effectively reflecting your equated monthly repayment.
Flat rate on the other hand is interest applied on the full loan amount regardless of the equated monthly installments you have made throughout the tenure of your loan.
Banks also usually offer flat rates at a lower percentage, enticing loan customers to think that they would pay lower total interest when in fact, monthly rest would yield lower interest payments as they adjust depending on how much you have already paid.
2. Loan amount
Local banks in Singapore offer the best renovation loans a maximum loan of six times your monthly salary while capping it at SGD $30,000. Some banks allow a lower loan quantum of SGD $5,000 while others require a minimum of SGD $10,000.
3. Loan tenure
A Singapore renovation loan usually can be paid in 3 years or within 5 years, while personal loans come with a repayment term of up to 7 years.
4. Extra fees
Be sure to check if there are extra fees on top of the interest rates like handling fees, administrative fees, processing fees, late fees so you wouldn’t be at a loss when paying as a loan customer.
5. Home Loan Provider
If you have applied for a home loan from your trusted bank, maybe you should check if they offer renovation loans too.
Usually, your home loan provider will give you discounts when taking a renovation loan. Maybank, for example, offers a renovation loan package of 3.88% to their home loan customers, lower than the usual renovation loan interest rates of 4.33%,
6. Other funding options.
Once you have seen and exhausted all the best renovation loan options available to you, do not forget that banks only offer lower interest rates to loans like car loans and home loans due to the fact that the purpose of those loans is to acquire or improve an asset, or as the bank sees it, a collateral.
Applying for home renovation loans and the like offer banks a collateral, virtually making their loans risk-free as they can seize your given assets.
In contrast, a personal loan does not require a collateral, which poses a greater risk for the banks. In response, the usual interest rate for a personal loan is a flat rate. A fixed interest rate calculated on the principal loan amount throughout the duration of the tenure.
Finally, where to apply for home renovation loans?
After everything is said and done, you are now capable of choosing your very own, preferred way of applying for a renovation loan in your trusted banks.
However, if you lack the credit score to apply for a loan at a good old bank but are still wanting to tackle this renovation project head-on, go for a loan through one of Singapore’s trusted and licensed money lenders, GM Creditz.
They may not have renovation loans to offer but their personal loan is so flexible, you can use it for home remodeling purposes. What’s more is it’s practically unrestricted unlike the usual home renovation loans available that will hinder and limit your purchasing capabilities. GM Creditz will surely satisfy your home renovation needs.