Renovation Loan Singapore (2020)
What is a Renovation Loan?
Renovation loans are loans that are meant for renovation purposes.
A renovation could be for your home or a commercial property. While a home renovation loan is considered to be a personal loan, the interest rate for a home renovation loan is usually lower than an actual personal loan.
We reckon that it is because lending institutions feel a little more secured when they know that you own a property asset, which increases the probability of you having enough cash flow to repay the loan.
However, there are certain restrictions that come with the attractive interest rates. Unlike a business loan in Singapore, where you have full discretion to use the funds for any purpose, there are restrictions as to the type of renovation that the loan is used for. Moreover, the loan will be disbursed directly to either your interior designer or contractor.
A typical renovation loan in Singapore will have a repayment period of up to 5 years.
The maximum amount that you can borrow will be up to six times of your monthly income or S$30,000, whichever is lower.
You will also be able to choose between two interest rate options — flat rate or monthly rest option. The flat rate remains the same throughout the loan tenure, and the monthly rest changes from month to month. While the monthly rest interest rates tend to remain lower than a fixed rate, there are periods that where it can go significantly higher.
Before taking up an offer from any of the banks or financial institutions, be sure to find out about all the hidden fees involved, such as the application or processing fees which will usually amount to about 1% of the loan amount.
Do note that if the loan has to be disbursed in stages or to multiple vendors, the banks can sometimes charge an additional fee, which can sometimes be negotiated to be waived.
Reno Loan Features
Below are the features of a renovation loan:
- Maximum loan amount: Up to 6 times of your monthly income or S$30,000 (whichever is lower)
- Repayment Period: 1 – 5 years
- Interest Rate: Between 2% – 5% p.a.
What Can A Renovation Loan Be Used For?
A renovation loan will allow you to finance most types of renovations, from creating a larger wardrobe to giving your kitchen a complete makeover.
Here is a list of renovation works that a renovation loan can typically be used for:
- Electrical and wiring works
- Built-in cabinets
- Basic bathroom fittings
- Flooring and tiling
- Painting and redecorating works
- Structural alterations
Do note that renovation loans do not cover the purchase of furniture and appliances.
A good way to pay for those would be take up the interest-free installment plans that are offered by many furniture outlets these days.
Do You Qualify For A Renovation Loan?
- You must be a Singapore citizen/PR
- You must be between 21 – 65 years old
- Main applicant must have a minimum annual income of S$24,000
- Joint applicant must be employed
- Joint applicant must be a spouse, child, parent or sibling of the main applicant
- Either the main or joint applicant must be the owner of the property to be renovated
Best Renovation Loan Interest Rates in Singapore
4.38% (existing home loan customers)
4.88% (non-home loan customers)
2.88% (existing home loan customers)
4.33% (minimum $15,000 loan, 4 year loan tenure)
4.98% (home loan customers)
5.37% (non-home loan customers)
3.68% (flat rate, below $15,000)
2.98% (flat rate, $15,000 to $30,000)
5.8% (monthly rest package)
*For flat rate package, interest is charged on original loan amount.
*For monthly rest package, interest is charged on loan outstanding amount.
For a long time now, we have observed that the RHB, CIMB, Maybank renovation loan offers seem to be the best ones around.
RHB, CIMB, and Maybank are Malaysian banks.
What Are The Required Documents To Apply?
Here is a list of the required documents that you will need to apply for a renovation loan sg:
- Copy of your NRIC
- Latest 2 years of Income Tax statements
- Quotation from your contractor or interior designer
- Title deed of property or any proof of ownership of property
- Proof of relationship between main and joint applicants (i.e., marriage certificate or birth certificate)
- Proof of billing (i.e., phone bill or utility bill)
Tips To Reduce Your Renovation Costs
We all know that renovations in Singapore can be very costly. For new home owners, this cost will come on top of the huge amount that you are already paying for your home.
Here are some tips to help make the costs of your renovations a little more bearable:
1. Get your renovation loan from the bank that you got your home loan.
As a rule of thumbs, you should approach as many lenders as you can to get as many offers as possible. This is so that you get a better chance of getting the best possible offer.However, if you do not want to waste time shopping around, your best bet would be to approach the bank that issued your home loan.
2. Complete your renovations in stages.
A good way to reduce your total renovation cost would be to carry out your renovation plans in stages. This way, you can reduce the total loan amount that you need to take up as well. Try by compartmentalizing the areas to renovate, and then proceed to renovate according to the designated compartments.
After each section is complete, you can then take your time to decide on subsequent renovations. As a rule of thumbs, try to start with the biggest and commonly used areas of your property.
Given that this method would delay your renovation plans by a fair bit. But the ultimate savings at the end of the day could be very well worth it. In fact, you even get to create more time for yourself to make better renovation plans.
3. Improvise on whatever you can.
For certain aspects of your renovation works, such as the installation of a new kitchen cabinet, or even a new wardrobe, there are cheaper alternatives.
For example, instead of getting your contractor to customize your kitchen cabinet, you could get a ready-made cabinet from a store like Ikea that just needs to be fitted into your kitchen area.
Try shopping around. For all you know, the ready-made options in a store like Ikea could prove to be a better option that a fully customized one.
Which bank has the lowest interest rate for renovation loan?
That would be the Maybank renovation loan – with a humble interest rate of 2.88% p.a.
If you are renovating a commercial property, it can even go as low as 1.78% p.a.
All hail the Malaysian banks!
As you could have imagined, the next in line would be RHB renovation loan, with a home loan interest rate of 2.98% p.a. (for loans above S$15,000).
How does it work?
Reno loans are easy to apply for in Singapore. You can either apply online, over the phone, or approach a bank outlet in person.
Generally, these are the documents that you will need to prepare:
- Proof of income (Income tax report, payslips)
- Title deed of property
- Quotation from contractor/interior designer
- Proof of relationship between joint applicants, if applicable
Before applying, you should always have a good idea of how much you want to borrow. Don’t over leverage if you do not need it.
It is important to note that when your loan is approved, the funds will not be issued to you. It will be paid to either your contractor or interior designer.