Renovation Loan Made Simple For Singapore Homeowners
A renovation loan is what both you and your spouse will need to consider when you have gotten the keys to your new property.
Securing cash to renovate your new home is challenging especially if you are a new homeowner - Well, everyone has a first time.
If you are planning to embark on a major renovation project, it could easily cost you between $40,000 - $80,000, and you may likely need additional funding to accomplish the job.
Here in Singapore. it is common for almost 70% of soon-to-be homeowners to take up a renovation loan for doing up a nice looking home. And it’s easy as many banks offer renovation loans for such a purpose.
There are some requirements that must be met before you may secure a renovation loan in Singapore. Understanding these requirements will help to ensure that the application process runs smoothly so you can get access to your loan within the least time possible.
What we have done here is that we simplified those long, confusing and technical clauses into something any normal human being is capable of reading.
Qualifying For A Renovation Loan in Singapore
Before sending in your renovation loan application, you must make sure you understand the loan’s limitations and requirements you will need to meet.
- You must own the property that you are planning to renovate. This may be a condominium apartment, HDB or other types of property.
- Only Singaporeans or Singaporean PRs between 21-55 years of age may apply for a loan.
- You must have at least an income of $2000 per month to qualify for a loan. However, if you do not meet this requirement you may apply with a joint applicant including your child, sibling, parent or spouse to meet the requirements outlined.
When you submit your loan application, you will need to have -
- A copy of both sides of your original NRIC.
- Your CPF contribution statement from the last 6 months.
- Your most recent computerized pay slip.
- Proof that you own the property to be renovated.
- An official quotation from your renovation contractor with their stamp and signature.
Basic Parameters of the Renovation Loan
- Understanding the parameters is critical in making sure that you are prepared to accept the responsibility. You may apply for a loan to complete the tiling, flooring, wall painting, electrical work, carpentry and work on the external compounds of a structure.
- Furnishing portions of your property must be taken on with a separate Furnishing Loan.
- The minimum amount offered for a renovation loan is $10,000 and the maximum is $30,000. This can be combined with other types of loans if you work with certain banks.
- You may set up your loan with a fixed or effective interest rate, though the specific interest rate offered will vary from bank to bank. Your bank will charge an additional processing fee between 1-2 percent of your loan amount upon signing of the agreement.
- The minimum tenure of a loan is 1 year and the maximum is 5 years.
In addition to the basic fees, you need to take note that your bank may also charge you for a late instalment payment, cancellation fee, full redemption fee, partial repayment fee, disbursement fee or administrative fee.
Whenever you have questions, always make an effort to ask the loan officer and make sure you clearly understand the terms and conditions before agreeing to accept them. This is to ensure you know the type of circumstance(s) when you may be charged and how to avoid these excess costs.
Like any type of financial agreement, you should take the time to find out offers from different banks before accepting a renovation loan. This can help you find a more affordable loan repayment schedule that will allow you to save on interest rates or additional fees.
There are many financial institutions in Singapore that provide renovation loans to homeowners, we have listed the popular ones below:
- CIMB Bank (Singapore)
- RHB Bank (Singapore)
- Maybank (Singapore)
- DBS Bank
- POSB Bank
- OCBC Bank
- UOB Bank
Last but not least, homeowners should always do their sums carefully. Do your calculations right and make sure you can afford to repay the monthly loan instalments without over stretching your financial capability.
The rule of thumb is to set aside 15% - 20% of your monthly nett income for this purpose. Also take into consideration additional liabilities the both of you may have now or in the next 3 - 5 years.
This will inevitably save you from serious pitfalls should any unforseen circumstance(s) occur.