Owning a home is truly something to be proud of, especially on this little red dot that is Singapore, where housing prices are astronomical. Even a simple 3-room HDB flat in Punggol these days is being sold for almost $700,000. Buyers–young and old–struggle to get their own HDB BTO units, with some trying eight or nine times before finally securing a ballot.
And that is to say nothing of the cost of renovations, which, over the lifetime of a home, become necessary, adding another layer to the financial burden. Thankfully, renovation loans are widely available in Singapore. Both banks and private lenders offer these loans, which can make it easy to realise your dream home.
You may be wondering how a renovation loan differs from a conventional personal loan. The key difference is that renovation loans are disbursed directly to the contractor carrying out the renovation, usually in the form of a Cashier’s Order (CO), rather than to you, the borrower.
The application process for renovation loans is also significantly different. For starters, you will have to provide the lender with your renovation plans and a quote from the contractor in order for the lender to approve the usage of your loans. In brief, only permanent changes are considered for renovation loans. Interior design, furniture and appliance purchases, unfortunately, do not fall within the definition of renovation for lenders.
Finally, you will be required to show proof of ownership for the unit being worked on. This means you would not be able to apply for a renovation loan for a rented unit (even if you have the permission of your landlord) or if you are staying in a home belonging to a loved one. Those who live in HDB flats or other high rise units will also be required to produce an HDB or MCST renovation permit.
As mentioned previously, you would need to inform the lender of your renovation plans in order to obtain their approval. The intent of this loan is confined to several approved types of building improvements. The renovation plans you submit can take the form of blueprints, a written report from your contractor, a signed invoice and the like. Below are some of the purposes for which renovation loans can be used:
This would include both maintenance of existing electrical systems, as well as the installation of new ones. Electrical fixtures and fittings, such as plug points, switches and power boxes are also covered by the loan. Certain appliances, especially those that form a part of the electrical system are also allowed, such as ceiling fans and lights.
Usually, cabinet installations take place in your kitchen. However, cabinets and other forms of permanent storage can also be installed in other parts of the house, such as in the bedrooms, study or entrance. The purchase of movable storage cabinets or cupboards are not covered under the renovation loan.
Renovation loans cover both painting and repainting, as well as other wall decorating such as the installation of wallpapers, application of textures, panelling and wainscoting.
Whether you intend to tear down walls or install new ones, a renovation loan can help. Other structural changes include creating archways, moving doors or windows, installing posts, beams and columns, as well as reinforcing foundations.
If you live in a landed house, a renovation loan allows you to upgrade your porch, repair old driveways, replace the main gate, enlarge the porch by removing beams and upgrade old porch roofing. The financing can also be used to install solar panels for a more energy-efficient home.
There may be many reasons why you would want to redo the floors of your home. These include old flooring coming loose (especially parquet), cracked floor tiles or badly stained tiles. Others may wish to renovate their floors to give it a more contemporary aesthetic.
Although renovation loans do not cover furnishings, the installation of permanent and immovable bathroom fixtures is permitted. These include bathtubs, shower stalls, sinks, toilets and bidets.
In general, renovation loans tend to have a lower effective interest rate as compared to personal loans. Some lenders, such as DBS bank, also offer a slightly lower interest rate to those who fulfil eco-friendly renovation requirements, such as installing solar panels, using eco-friendly building materials, purchasing energy-efficient fixtures and so on.
Single applicants for renovation loans can expect financing up to 6x their income, or $30,000, whichever is lower. You may also try for a joint loan application with someone else. However, the maximum loan quantum remains at $30,000 or 6 times the income value of the applicant with the lower income, whichever is lower.
If you require a higher quantum of financing, it is better to opt for a personal loan instead, which will also give you more flexibility in terms of loan usage.
We hope this article helps clear some things up when it comes to renovation loans. Whether you're looking to make small upgrades or undertake a major renovation project, a renovation loan can provide the financial support you need to turn your home improvement dreams into reality.
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