What is Renovation Loan?

Would you like to upgrade the interior of your Singapore home or increase its value and make it more eco-friendly?  If you were short of cash when you originally purchased the house because of the necessity of paying for it, the home can now be upgraded to make it your dream home.  If you are now short of money for the upgrade, you always have the choice of taking a renovation loan.  The benefits of a renovation loan are as follows:

  • Unlike many other forms of investments, an investment in land and a home appreciates considerably over time especially if the home was kept in a high-quality condition.  Well-designed and well maintained homes will always be in demand and just renovating your bathroom or a remodelling your kitchen can provide you with a substantial return on your renovation expenditure.
  • Your equity in your house is protected.  As an alternative to a renovation loan, you can refinance your existing mortgage or take out a new mortgage.  However the amount you can raise on either refinancing or a fresh mortgage is limited by the value of your house.  You would therefore be better off if you take out a renovation loan instead.
  • Not only will you be able to refurbish and repair your house but you should also take the opportunity to improve the safety and security of your house to protect the well-being of your family.  Money spent on fences or surveillance systems is always money well spent.

For your information, the Singapore Renovation Contractors and Material Suppliers Association have provided the following rough guidelines:

  • You should plan on spending about S$15,000 on the renovation of a new three of four room HDB flat though this price will vary depending on the circumstances.  This estimate includes flooring, painting, kitchen cabinets and curtains.
  • If you want a high end renovation of a four room HDB flat which includes items such as designer carpentry work, you should plan on spending between S$80,000 and S$100,000.

Typical criteria for a renovation loan are as follows:

  • You must be a citizen or permanent resident of Singapore and your age must be between 21 years and 55 years
  • Your annual income must be at least S$24,000 if you are the main applicant
  • Anyone applying jointly with you does not need to meet the income criteria
  • Anyone other than the owner who is a joint applicant must be related to the owner in the capacity of spouse, child, sibling or parent.  Documentary evidence of the relationship has to be furnished.

At its discretion, the bank or the lender may extend a loan of up to six months of the monthly income of the applicant or the joint incomes of the joint applicants.  The maximum amount of the loan will normally be S$300,000 while the minimum will be S$100,000 and the loan is normally repayable over five years.  The bank or lender may choose to visit your home to verify the progress of your renovation work.  There is also a processing fee which is normally 0.1% and is payable upfront when you accept the letter of offer.

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