The best thing we can invest in during these trying times is a safe space to protect us from the virus. HDB properties are among the best purchases that can provide us with an excellent and safe space to rest and remain productive.
There are many reasons why people choose to invest in HDB properties in Singapore. However, sometimes HDB properties are not designed to suit our specific needs and taste to meet our comfortable living requirements. Wanting to renovate this space is only natural, but it will involve high costs. Thankfully, Singapore’s financial institutions can help you with excellent financial products.
How Can You Finance Your Renovation Project?
Some people may not have sufficient funds to cover the expenses. Make sure you consider all the options before deciding on certain financing.
When it comes to financing, there are many options available in the market today. Some of these are the following.
Bank Renovation Loan
A bank renovation loan is when a bank lends you money to renovate your home to increase your home’s value. You get to keep the loan proceeds after the renovations have been completed and repay the bank with interest. Because they’re made for the sole purpose of renovation, bank renovation loans have a shorter payment term than personal loans.
Bank Personal Loan
A personal bank loan is a type of consumer credit typically unsecured and issued by a bank or other financial institution. The amount of the personal loan is often six months of your monthly salary. However, the terms and conditions and the interest rate are determined by the individual financial institution.
Licensed Moneylender Personal Loan
A personal loan that Singapore’s licensed money lenders can provide to you. These are easy to get because they have no high credit score requirements and offer you six months of your monthly salary.
Renovation Loan vs. Personal Loan
Here’s an in-depth comparison between a renovation loan and a personal loan.
|Financial Product||Yearly Interest Rate||Loan Quantum||Loan Tenure||Processing Fees||Flexibility of Use|
|Renovation Loans||3-7%||6 months of your monthly salary, total renovation costs, or your stipulated amount||1-5 Years||1% of loan quantum + 1% insurance (depending on your lender)||Renovation-oriented|
|Personal Loans||4-6%||6 months of your monthly salary on average||1 Year||Up to 10% of loan quantum||General purpose|
When to Use a Renovation Loan?
A renovation loan is an excellent option for people who want to make changes to their home but don’t want to do it all at once. You can use this financing for anything, from kitchen renovations to new flooring in the living room. These loans allow homeowners to spread the cost of renovations over a long repayment period.
When To Use Personal Loans?
Personal loans are often helpful when someone needs to save a lot of money for a big purchase or is having difficulty paying their bills with just their paycheck. We advise that you use these loans only in emergencies or lack other financing options because their high interest rates can be taxing.
The Best Home Renovation Loan Products for 2022
Here are the best home renovation loans for this year in Singapore. All interest rates in this table come from a S $30,000 inquiry with a 3-year loan tenure.
|Annual Interest Rate (and EIR)||Minimum Income Requirement||Processing Fee||Maximum Loan Tenure|
|DBS Renovation Loan||3.88% (Flat EIR)||S $24,000||1% of principal + 1% insurance payment||1-5 Years|
|OCBC Renovation Loan||4.18% (5.19% EIR)||S $24,000||1.5% of the approved loan amount||1-5 Years|
|CIMB Renovation i-Financing||4.33% (5% EIR)||S $24,000||1% of principal||1-5 Years|
|HSBC Personal Loan||3.7% (7.0 EIR)||S $30,000||S $88||1-5 Years|
|Standard Chartered CashOne Personal Loan||3.88% (7.63% EIR)||S $60,000||S $0||1-5 Years|
|Licensed Moneylenders||1-4% Monthly Interest Rate||S $1,500 Monthly Income||Up to 10% of principal||6-12 months|
How to Choose The Best Financing For Home Renovation?
A renovation loan and a personal loan have varied differences. Here are big factors that play a huge role in home renovations.
- Interest Rate: We highly advise that you avoid high-interest rate home renovation loans to avoid deep debt. Any financial manager will encourage you to shop around and compare interest rates.
- Maximum Loan Amount: Shooting for a high-amount renovation loan might leave you with more spare cash than what you need. Assess the renovation tasks you need to do to learn how much renovation loan amount you exactly need.
- Fees and Charges: Take note of hefty late payment fee amounts you can incur from a DBS renovation loan or OCBC renovation loan. We highly advise any borrower to always pay on time and in full.
- Compare Lenders: Specialized renovation loans in Singapore from top-notch lenders often offer better financing choices. We suggest that you prioritize their offers unless you’ve done great due diligence on a competing product.
- Current Promotions: Promotions can be a double-edged sword for home renovations. If the DBS renovation loan’s promotions are helpful for your situation, you can consider it greatly.
How Much Should I Budget For My Renovation Project?
There are so many things that go into renovating a space. You have to create a floor plan, research which materials are best for the project, and find contractors. You should not underestimate any home renovation task involved in your project. Here are a few things you can do for an accurate budget.
- Make a list of all the things you want and need in your renovation. Doing this will help you create a realistic budget and see what aspects are more important to you.
- Think about your project needs before contacting any contractors. Talk to them about the scope of work that is needed for your project. Get estimates from at least three contractors before deciding on one for your project with the best price.
- If possible, work with an architect as early as possible to plan out your space requirements and meet with designers to get ideas for decorating.
Factors That Affect Your Renovation Costing
What affects the total amount you’ll need to save for your home renovation? Here are five factors.
- Project Size: We’ve mentioned planning your space requirements because these greatly affect your total renovation costs.
- Current HDB Property Condition: An HDB property in good condition requires fewer renovation tasks and expenses. We can’t say the same for the alternative.
- Renovation Tasks You Need: You’ll spend much more on renovations that require more personnel to perform the necessary tasks, such as designing and implementing designs.
- Affordable and Premium Materials: You can find many affordable and premium materials on the market, and they will greatly affect your budget due to native material price and installation complexity.
- Contractors and Designers: Contractors and designers have varying levels of expertise, which means they have varying service prices, too.
Case Study: 4-Bedroom HDB Property Renovation Costs
Singapore is a great location because of its status as a relatively stable country with high quality of life. The property prices in Singapore are quite high. Therefore, it’s important to apply for adequate financing if you want to renovate your home.
It’s very common for Singaporeans to live in a 4-room HDB flat. Alternatively, renovating a less-roomed HDB might result in shorter renovation loan periods. Here are the total costs involved with it:
|Remodeling Area||Average Light Renovation||Average Moderate Renovation||Average Extensive Renovation)|
|Hacking||S $1,200||S $2,800||S $11,350|
|Masonry||S $3,000||S $10,400||S $37,500|
|Carpentry||S $7,000||S $17,950||S $53,450|
|Plumbing||S $1,200||S $2,800||S $8,700|
|Electrical||S $1,000||S $2,450||S $5,450|
|Painting||S $800||S $1,600||S $2,950|
|Glass & Aluminum||S $1,500||S $3,850||S $9,450|
|Cleaning and Polishing||S $700||S $1,400||S $7,800|
|Appliances||S $7,500 (Aircons, Washing Machines, etc.)|
|Total||S $23,900||S $50,750||S $144,150|
Saving Up On Renovation Costs
Finding an Excellent Contractor
Excellent home-remodeling contractors in Singapore have a few key traits that make them stand out from the competition: customer service, project management, and flexibility when it comes to pricing. These contractors need to have excellent communication skills to both deal with clients and coordinate their team effectively.
Singapore home remodeling contractors need to be self-sufficient enough to handle their own projects without any supervision. Lastly, these professionals must pay utmost attention to detail to make the most accurate estimate possible for their clients.
Mix Affordable and Premium Materials
Assuming that the cheapest materials are also the weakest is incorrect. Many inexpensive materials can deliver exceptional results for HDB renovation projects.
When you can afford it, you should also consider investing in high-quality and long-lasting materials.
Affordable doesn’t necessarily mean cheap or low quality. You should always invest in quality materials if your budget allows for it, even if you end up spending more upfront. Often, more expensive materials last much longer and can help you save up much more in the process.
Get Your HDB Renovation Guidelines and Permit
It’s important to secure your HDB renovation permit before starting. You’ll need to go through the HDB renovation guidelines before you can obtain your permit.
Monthly Income and Approved Loan Amount
You’ll need appropriate monthly income and an approved loan amount. Having a high monthly income leads to a huge approved renovation loan amount. The other way is to have enough savings to be used as a down payment or equity for your renovation.
Lenders will compare your total debt servicing ratio with your credit score when you apply for a mortgage. Doing this helps them figure out how much of their money they are willing to risk on you, as well as what kind of interest rate they will charge you.
Budget Your Home Renovation Finances Effectively
Budgeting is important for home renovations because it allows you to stop and think about what you are doing before you do it. This way, you can buy what you need at the best price possible. It also ensures that the quality of your renovation doesn’t suffer.
A renovation budget usually includes costs such as supplies, labor, permits, and other expenses. You can create the budget differently depending on how the homeowner wants to handle the remodeling work. For example, they can hire a contractor to do all the work and do some work by themselves.
If your budget doesn’t meet your budget expectations, you can always count on Instant Loans and licensed moneylenders to help you find ample financing.
FAQs That Need Proper Answers
What Can’t I Pay With My Home Renovation Loan?
The renovation loan is a great way to save on costs for your next project. You can use this loan for many things, such as purchasing supplies, installing fixtures and appliances, and more for the home. Borrowers cannot use it for purposes that go beyond the scope of a renovation.
Can I Use My CPF To Pay For My Home Renovation Expenses?
You cannot draw from your CPF to renovate a private property, but if you buy an HDB that is part of the Build-To-Order scheme, you can borrow from your CPF to afford the cost of upgrading.
Who Can Apply For Renovation Loans?
To apply for a renovation loan, you must meet the following criteria:
- A Singapore Citizen or Singapore Permanent Resident
- Between 21 – 65 years old (maximum age limit differs across banks)
- Earning a minimum annual salary of S$24,000 (for joint applications, at least 1 applicant needs to earn this amount)
- The property owner or a related family member who has the owner’s consent (joint applicants must be related)
If you cannot qualify for a bank loan for renovation, you can consider applying for a personal loan instead. However, keep in mind that banks’ personal loans tend to have a higher interest rate than renovation loans.
Can I Borrow Two Renovation Loans At Once?
Most renovation loans allow you to borrow up to S$30,000. If you require more than S$30,000 for your renovation, it is possible to submit two application forms and take on two loans. However, this would also mean committing to repayments for both loans and managing one bank statement instead of just one. Alternatively, you could consider borrowing more money by applying for a personal loan.
Before you take on multiple loans, check how much your monthly debt obligation will be. It’s important to know what the Total Debt Servicing Ratio is – it shows what’s available to you each month. To avoid your monthly debt obligations exceeding 60% of your monthly income, you have to ensure that the total monthly debt obligations you take on (including the TDSR of your home & renovation loans) are less than 60% of your monthly income.
Will Home Renovation Loans Improve My Credit Score?
Home renovation loans can help you improve your credit score in several ways. You will have a shorter repayment period than with a traditional loan, which will put less pressure on your monthly budget. You can also improve your credit by making payments on time and paying off the balance in full when possible.
However, even if you do receive a home renovation loan, it is not guaranteed that your credit score will improve.
What Are The Common Fees Involved in Renovation Loans?
The main fees to consider when looking into a renovation loan are the interest rate and these other charges:
- Processing/Handling Fee: 1% of the approved loan amount
- Late payment fee: S $80
- Early repayment fee: Usually 1-2% of the outstanding loan balance
- Cancellation fee: 1% on the loan amount canceled
Home Renovation Loan: To Sum It All Up
- Home renovation loans give you enough cash to renovate your HDB property
- Banks and licensed moneylenders provide high-quality renovation loans
- Many factors can increase or decrease your home renovation budget
- It’s best to budget and use financing as a backup if your savings fail to cover all expenses.
When you are ready to get a renovation loan, try Instant Loan’s quick service. Our licensed moneylender quoting service will get you three quotes from Singapore’s best lenders. Now, you won’t have to spend so much time comparing all the available financing in Singapore. Visit our website today and get your quotes now!