You just went inside your new flat or condominium, and you feel underwhelmed. Deep inside, however, you know that a renovation will help set things right.
A renovation loan allows a homeowner to borrow funds for their renovation project and repay the loan, plus interest, over an extended period of time. Homeowners looking to give their property a new look and an added value will find renovation loans helpful. Plus, they usually have lower interest rates than other financing options.
Renovation Loans Vs. Personal Loans
Sometimes, renovation loans have the same loan quantum as personal loans, but it doesn’t mean that both financings are the same. This table easily shows the similarities and identifiable differences between the two financial products.
|Financial Product||Yearly Interest Rate||Loan Quantum||Loan Tenure||Processing Fees||Flexibility of Use|
|Renovation Loans||3-7%||6 months of your monthly salary or total renovation costs||1-5 Years||1% of loan quantum and 1% insurance||Renovations Only|
|Personal Loans||4-6%||6 months of your monthly salary on average||1 Year||Up to 10% of loan quantum||Use it for anything at all|
Scopes and Restrictions of Renovation Loan
Renovation loans are useful only for reconstructing and improving your house. This quick table can explain it best.
|Can Be Used For||Can’t Be Used For|
|Electricals||Property Down Payment|
|Aesthetic Enhancements||College Funding|
|Room Expansions||Equipment Purchases|
|Contractor Payments||Medical Expenses|
|Material Budgets||Sudden Unemployment|
The Best Renovation Loans in Singapore for 2021
Here are some of the best renovation loans you can find in Singapore for 2021 based on a S $30,000 renovation loan that’s payable for three years.
|Annual Interest Rate (and EIR)||Minimum Income Requirement||Processing Fee||Maximum Loan Tenure|
|DBS Renovation Loan||3.88%||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|
|POSB Renovation Loan||4.88% (5-8% EIR)||S $24,000||1% of principal||1-5 Years|
|RHB Renovation Loan Monthly Rest||4.18% (Flat EIR)||S 24,000||1% of principal||1-5 Years|
|Licensed Moneylenders||Maximum of 4% Monthly Interest Rate||S $1,500 Monthly Income||Up to 10% of principal||12 months|
Let’s see each loan’s features in full detail
DBS Renovation Loan
DBS offers a renovation loan that gives you up to S $500,000 or six months of your monthly salary to help you with your home’s renovation. You can either use the full amount for your renovation or just a portion of it. You can repay the loan at any time subject to the loan terms and conditions.
OCBC Renovation Loan
OCBC Renovation Loan is the first home loan in Singapore where the loan amount is linked to the value of your property. The renovation loan allows you to borrow six months of your salary or between S$50,000 and S$2,000,000 with flexible tenor options of 1-5 years to match your rebuilding plans.
CIMB Renovation i-Financing
CIMB is now providing Renovation i-Financing in Singapore to help you fund your home improvement projects. The bank can lend you up to 80% of the renovation cost and allow you to repay the loan in monthly installments. You can use the additional funds for anything from plumbing and electrical work to hardwood floors and new bathroom fixtures.
POSB Renovation Loan
The loan has a variety of repayment options so that borrowers can choose the terms that suit their budget and needs. POSB Renovation Loan has a repayment tenure of up to 1-5 years, which may or may not work for some homeowners.
RHB Renovation Loan Monthly Rest
This renovation loan can provide homeowners with a maximum loan amount up to $400,000 or six times their monthly salary, and the maximum term of the loan is 1-5 years.
You might find this loan unique because it won’t require monthly repayments for the first year,
Instant Loan’s Accredited Licensed Moneylenders
Let’s face it. Bank renovation loans can be tricky and limiting due to the specificity of the usage of the approved loan amount. And sometimes, loan applicants may find it quite a feat to qualify for bank loans for varying reasons, such as the minimum annual income requirement and a healthy credit score.
One can find the ease of approval and less stringent requirements from licensed moneylenders personal loan where a loan applicant can loan up to six times the monthly income and be repaid in flexible terms. The interest rate is capped at 4% so borrowers can be sure that they can manage their settlements well. Plus, the loaned amount can be used for various purposes without the margins offered by banks.
Renovation Loan Eligibility Requirements
Borrowers must comply with the following eligibilities:
- Singapore Citizen or Permanent Resident
- 21 – 65 years of age
- The property owner or related family member (parent, spouse, child, or sibling) who has the owner’s consent
Banks might ask for the following requirements:
- Completed Application Form
- Copy of NRIC (front and back)
- Scanned / Digital invoice or quotation signed by contractor and applicant(s)
- Income Documents
- Proof of Ownership (for non-DBS/POSB home loan customers)
- HDB or MCST Renovation Permit (where applicable)
How Can You Find The Perfect Renovation Loan For Your Upcoming Project?
Here are a few easy steps to find the perfect renovation loan for your upcoming project
Do You Have Existing Debt?
Sticking to just a single renovation loan makes debts easier to manage. Juggling multiple debts can be an easy temptation for some homeowners, but it’s always a bad idea that can lead to more financial trouble. When there are multiple loans, it can be hard to make sure the payments are made on time and the debt balances are kept low.
Flat Rate vs. Monthly Rest
Homeowners will have to deal with two types of interest rates. Learn more about each of them below.
Loans with flat rates will calculate your interest based on the original balance and not the outstanding balance. Therefore, you’re paying a flat interest despite the decreasing outstanding balance.
Monthly Rest Calculation Rate
Monthly rest calculations are known as effective interest rates (EIRs). These rates are much higher than flat interest rates because they will calculate your interest based on your outstanding balance. If you’re a borrower who pays more than the renovation loan’s minimum repayment amount per month, you can pay relatively low interest with EIRs.
The Perfect Renovation Loan Amount
The perfect renovation loan amount is one you’ll find to have comfortable monthly repayment and an adequate minimum loan quantum to meet your project’s needs. To find out the perfect amount of a loan, you should first consider what you can afford to pay monthly and how much you need. Once you have this figured out, apply for a loan that meets these two criteria.
Total Fees That You’ll Incur
Be wary of low renovation loan interest rates as they might entail higher fees. Renovation loans have their respective processing, late, and penalty fees. Read through your financing terms and conditions to ensure you can handle the renovation loans’ total fees and see what the catch is.
Promotions And Discounts
Imagine having a year of flat interest rate and having a monthly rest rate by the following year. That’s a game-changing promotion that can help save you so much money. With promotions and savings in mind, we highly encourage that you stay tuned to your lender’s renovation loan promos to take advantage of any possible renovation loan promos.
Customers with poor credit scores will likely face rejection on their loan applications because banks will always prioritize low-risk customers. Plus, any customer who had done poorly on a previous personal loan or has an outstanding loan amount in debt should reconsider applying for a loan until they have improved their credit scores. Fortunately, you can increase your credit scores by financing with highly reputable licensed moneylenders and improve and stabilize your monthly income sources. Licensed moneylenders still look into a borrower’s credit score health but are more considerate than banks’ stringent qualifications.
How To Apply For a Renovation Loan
Here are some basic steps to apply for a renovation loan.
- Contractor’s Quote: You’ve just discovered you’re eligible for a renovation loan. Now, you can start asking for renovation and designer contractor quotes and use their proposals during your renovation loan application.
- Eligibility and Required Documents: Submit the documents we’ve listed above to your lender. Keep in mind that they may ask you for more documents that support your eligibility and items that present your contractor’s proposal in full detail.
- Submit Your Application: Use your lender’s portal or branch to submit your application. Follow their on-screen or phone instructions.
Most lenders have their list of renovation loan application instructions. Make sure you’ve read them thoroughly before passing your application to prevent banks from rejecting your home renovation loan application.
If you encounter difficulty getting approved with banks, we can easily connect you to the country’s top licensed moneylenders and even provide you with up to three loan quotes that are tailored fit to your project’s needs, for free! The best financing is the one that offers the most flexibility.
Can I Use My CPF to Pay For My Property Renovation?
Unfortunately, no. The Central Provident Fund does not permit borrowing against your savings as a renovation loan package. You can only use it as an education loan for yourself, your spouse, or your immediate family members.
How Do I Know If I’m Working With an Honest Singapore Contractor?
The Professional Engineers Act is the fundamental law that oversees the construction of Singapore’s buildings. This law requires all Singaporean renovation teams to be fully licensed and certified, taking into account their safety practices and environmental impact.
The law also mandates that a licensed contractor awarded an engineering construction project must employ a professional engineer as part of their team. Doing this ensures that the final product is safe for use by everyone. Therefore, always ask if your renovation team has a licensed, professional engineer.
How Much Can I Borrow From Home Renovation Loans?
Most banks offer a six-month salary limit for most borrowers. However, some can limit this to hundreds of thousands to prevent overcharging or maximize their profit.
To know your total borrowing limit, we highly suggest that you call and consult ..your home loan provider.
Can I Use a Personal Loan Instead of a Home Renovation Loan?
Yes, you can, but with a few caveats because personal loans have no case-specific renovation terms that can cause challenges during your renovation. For example, a personal loan grants six months of your salary and might not reach the contractor’s proposed ideal renovation quote.
As a result, you’re left to fill the gap with your own money. Nevertheless, you can find that licensed moneylenders’ personal loans are more flexible when it comes to the usage of your approved loan amount and with relatively competitive interest rates when compared to what banks offer.
Who Should Use Home Renovation Loans?
Home renovation loans are a good option for those who want to fix up and improve their homes. These loans can cover renovations from the roof down to the paint on the walls. And while they may have high monthly payments, they’re often worth it in the long run.
For example, an HDB property owner sold their property to you but left it in poor condition. However, you don’t have enough cash to renovate your property, so it’s wise to look at an existing home loan as a great option to solve your issues.
Can I Borrow Most Renovation Loans While Paying For Another Loan?
You can, but it’s never wise to do this. Suppose you are looking to get a home renovation loan and pay for a new car simultaneously.
In that case, it may be better to process both loans consecutively because it’s easy to mismanage your finances with multiple commitments.
When you take out two loans at the same time, this means that both lenders will find you a high-risk borrower for handling two financings simultaneously.
What Do I Do With The Remaining Renovation Loan Proceeds?
You can keep the unspent renovation loan money and repay them to the lender, or you can use them for anything else after the project as long as you can pay your lender back. However, you won’t see the remaining renovation loan amount if the bank deposits the amount to your renovation contractor.
Do Renovation Loans Include Insurance?
No. If you want insurance for your renovation project, you need to find an insurer separately. Contractors typically provide labor guarantees that ensure they will answer to the consequences of faulty project events or overall results.
What Fees Will I Face With Loans for Home Renovations?
Banks usually charge a fee of 1% of the loan amount at the start. You might pay this at the point of approval. For DBS/POSB, this includes an insurance premium. If you use OCBC, there will be an additional S $200 fee that goes to the bank in addition to the 1% administrative fee.
My Contractor Dropped Me At a Later Renovation Stage After Loan Disbursal. Will This Affect My Loan?
Banks will likely charge you an amount to change the loan recipient’s name at a later stage. However, you can be sure that the bank will discontinue disbursing the loan’s remainder and handle the recollection of unused fees from your contractor.
If you decide to discontinue your renovation, your lender will charge you for the entire loan amount they’ve disbursed and not the loan amount on your contract.
How Hard is it to Get a Renovation Loan in Singapore?
All the banks we’ve listed here welcome all customers with various credit scores. However, they’re highly likely to approve the loan applications of high credit score homeowners with a proven track record because of their low-risk profile.
To Sum Everything Up
- Renovation loans can only handle specific tasks
- You can change your property’s aesthetic and functions with a renovation loan
- Renovation loans can have the same loan amount as personal loans
- Your renovation loan can’t be used for other projects or purchase of your desired home pieces that will finalise your home renovation
At Instant Loan, we have partnered with the top money lenders in Singapore to make it easy to get your hands on cash from long-term, short-term, or online loans. With Instant Loan, we make sure you get matched with the right loan lender faster to give you peace of mind.
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