Renovation Loan

January 16, 2024

Getting a home renovation loan in Singapore is a common concern, for those just moving into their flat or condo. Unfortunately, many people can’t afford to pay for their renovations all at once – for such cases, home renovation loans provide a simple form of financing:

The ups and downs of renovating

For homeowners, renovations allow you to personalise a home to your needs. For example, some home owners may not like HDB’s new “open kitchen” concepts; they may want to partition it off to form a separate dining room. Buyers who have purchased a resale flat or condo often prefer to personalise it, rather than keeping the style of the previous owners.

Sometimes, renovations are not a matter of choice. For example, an old resale unit may be in a state of disrepair, and need complete renovations. Or if you’re looking to rent out a property, or sell it, basic renovations can help to improve its attractiveness to tenants or buyers. Well thought-out renovations can raise or help maintain your property value.

On the downside, renovations can get expensive. Most three-room flats cost at least $10,000 in renovations, with five-room or larger flats typically costing twice or three times more.

Renovations for a 1,400 square foot condo can range anywhere from $30,000 to $50,000, while renovations for penthouses, landed properties, and other bigger units can reach into the hundreds of thousands.

The other downside is that renovations are inconvenient – you may not be able to stay in, or rent out, the property when certain renovations are underway. It can take a few months to complete, so you may need temporary accommodation elsewhere.

Handling the cost of renovations

There are a few tricks you can use, to try and keep the cost of renovations down.

The most common one is to renovate “room by room”. For example, you might renovate the kitchen and master bedroom first. A few months later, when you’ve saved more money, you move on to renovate the toilets, and then the dining room and living room. This doesn’t make your renovations any cheaper, but it does help to stagger the cost, and maintain your cash flow.

Another method is to use a contractor, rather than a full suite Interior Design firm. Yes, there’s a difference: An Interior Designer (ID) draws up the concept, plans, designs, etc., while a contractor’s role is to execute those plans.

But if you want to save a bit on renovations, you can elect to skip the ID and go straight to a contractor. Some contractors are experienced enough that they can help you with the design element as well.

A third method is to use substitute materials with the same function or aesthetics. For example, these days you can get vinyl flooring that has the colour and even the texturing of wood; this is much cheaper (and longer lasting) than actual parquet flooring. Your contractor or ID can advise you on alternative materials.

Even with all the above methods, many people in Singapore cannot pay the full cost of renovations, all at one go. You will typically need a home renovation loan, or affordable personal loans.  

Types of renovation loans in Singapore, and how to get them

There are three basic ways to get renovation loans:

●       Bank renovation loans

●       In-house financing from design firms / contractors

●       Non-bank lenders

1. Bank renovation loans

Note that these are not the same as personal loans. Bank renovation loans are typically capped at $30,000, or six months of your income, whichever is lower. (And in case you’re wondering, yes, this is why so many design firms seem to like projecting budgets near this amount).

Bank renovation loans typically have interest rates of up to five per cent per annum.

This is a good option if you can qualify for it; but note that $30,000 is not an especially high limit, for a five-room flat or condo. There is a chance that you will need more than the bank renovation loan can provide.

Also, note that the bank renovation loan cannot be used for furnishings (e.g. sofa sets, beds, and TVs). Some banks may have an additional furnishing loan you can take, but this varies greatly between them.

2. In-house financing from design firms / contractors

Some ID firms and contractors provide in-house financing for clients. They can draw up the terms as they like, so you need to be sure to read it all carefully. Interest rates are typically higher than the bank, but there’s no “typical rate” as it really depends on which firm you approach, what deals they’re willing to give, etc.

3. Non-bank lenders

Non-bank lenders, such as Friday Finance, can provide loans for your renovation. While rates may be higher than the bank (around one per cent per month), repayment terms are also more flexible.

One viable strategy is to use the bank renovation loan first – but if that proves insufficient, you can borrow the difference you need with a short-term loan from non-bank lenders like Friday Finance.

(Or you can use the bank renovation loan for your renovations, and take a non-bank loan to cover the cost of your furnishings).

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