A home renovation loan is a godsend to homeowners who need access to funds for their home remodeling projects. This is especially true with the rising costs of materials and labor. In fact, the expected renovation costs for a standard 3-room HDB flat will set you back around S$45,800 to S$56,000.
If the cost of renovation is bigger than your savings, a home renovation loan will help boost your cash flow. The maximum renovation loan you can take for an HDB flat is S$30,000 or six times your monthly income. The average renovation loan interest rate is 5.33% with a one-time processing fee of 0.75% and 2%.
But how does a home renovation loan work? Here we’ll talk about the different types of renovation loans in Singapore, how to set a budget, and the top renovation loans to help you get started.
What Is a Renovation Loan?
As the name accurately suggests, a renovation loan is a type of loan that would help you pay for the cost of home renovation, whether it be repairing or enhancements you want or your need for your house.
Home renovation loans can be used to cover the following renovation activities:
- Hacking and structural alterations
- Flooring and tiling works
- Electrical and plumbing works
- Painting
- Carpentry, such as installation of built-in cabinets
- Installation of solar panels
- External works within the compound of your property
Renovation loans can also be used for renovation projects in all types of residential housing, including new and resale HDB, condominium, and landed properties.
Features:
|
| Banks | Licensed Money Lenders |
|---|---|---|
| Interest Rate | Between 3-5 % p.a. | Up to 4% per month |
| Loan Tenure | Up to 5 years | Up to 12 months |
| Loan Amount | Up to S$30,000 or 6x your monthly income | Up to 6x your monthly income |
| Processing Fee | 1% of your approved loan amount | Up to 10% of the approved loan amount |
So how does a home renovation loan work?
Once the renovation loan is approved by the bank or legal lender, a processing fee will be deducted from the approved loan amount. The loan amount will be released to the renovation contractor you’ve selected for your home remodeling project.
Licensed money lenders, on the other hand, typically disburse the lump sum amount to the borrower or their designated account, not the contractor.
Furthermore, some banks or financial institutions may conduct site visits after the loan disbursement. They may want to ensure that the loan proceeds are spent for the stated renovation works.
Types of Renovation Loans in Singapore
- Personal Loan for Home Renovation: With personal loans, you can use the proceeds for basically anything. As such, you can use it for home renovation work.
- Home Renovation Loans: Unlike personal loans, this type of loan comes with restrictions. You can only use it specifically for renovation work.
- Home Equity Loans: With this loan, you will be borrowing against the equity of your home at a fixed interest rate. The amount you can borrow will depend on your property’s market value and mortgage balance.
- Credit Lines: A personal line of credit is a type of loan that allows you to draw money from a predetermined credit limit. The interest is charged only on the amount you’ve “withdrawn”.
Can I Use an HDB Loan for Renovation?
HDB only provides housing loans, not renovation loans. As such, you can’t use an HDB loan since it is used specifically for the purchase of your HDB flat.
Additionally, you cannot use your Central Provident Fund (CPF) to repay your renovation loan.
Some General Guidelines To Consider When Budgeting for a Renovation
Before you take on a renovation project, it’s best to have an idea of the average renovation costs in Singapore. The expected renovation costs in 2023 will average:
| Type of Renovation Project | Renovation Cost |
|---|---|
| Standard 3-room HDB Flat | S$45,800 to S$55,700 |
| Standard 4-room HDB Flat | S$49,500 to S$62,800 |
| Standard 5-room HDB Flat | S$55,000 to S$60,000 |
With that said, these are the essential things that applicants should consider before getting a renovation loan.
- Set a Budget
- Prioritize your needs
- Get multiple quotes from renovation contractors
- Consider financing options
- Allocate funds for contingencies
Top Renovation Loans in Singapore
To help you find the best renovation loans, here is a curated list from the major banks in Singapore:
| Banks | Interest Rates | Loan Tenure | Maximum Loan Amount | Processing Fees and other charges | Eligibility Requirements |
|---|---|---|---|---|---|
| 4.18% p.a. | Up to 5 years
| Up to S$30,000 or 6x your monthly income (whichever is lower)
| 1% processing fee 0% Admin Fee |
| |
| OCBC Renovation Loan Monthly Rest | 4.18% p.a. | 0% processing fee 0.50% Admin Fee |
| ||
| Maybank Renovation Loan | 6.53% p.a. | 1.25% or S$150 processing fee 0% Admin Fee |
| ||
| CIMB Renovation-i Financing | 4.15% p.a. | 1.2% processing fee 0 % Admin Fee |
|
To Summarize
It is best to apply for a renovation loan from the same bank where you got your home loan. This is because most banks offer lower interest rates to existing home loan customers.
But based on the comparison table above, the CIMB Renovation-i Financing renovation loan offers the best rates. On top of that, they also have competitive introductory fees since it only charges a 1.2% processing fee and no administrative fees. Plus, those with an annual income of at least S$24,000 can easily qualify.
Licensed Money Lenders as an Alternative
What if a traditional bank renovation loan is not an option? Or maybe you need immediate financing for emergency home repairs?
Licensed money lenders in Singapore are a viable option. These legal lenders are approved and registered under the Ministry of Law. They abide by the rules and regulations set in the Moneylenders Act. Plus, they offer a wide variety of loans, including personal loans, foreigner loans, bridging loans, renovation loans, and more.
Money lender renovation loan features:
- Loan amount: Up to 6x your monthly income
- Interest rate: Up to 4%
- Loan tenure: Up to 12 months
- Processing fee: Up to 10% of the approved loan amount
Application Process for Renovation Loans
Documents Required:
- Identity card/NRIC
- Proof of Residence (current utility bill, a letter addressed to you, or tenancy agreement)
- Proof of employment (certificate of employment or recent 3 months’ payslip)
- SingPass (to log into your CPF, HDB, IRAS website)
- Copy of the “Option to Purchase” (OTP) of the home you are renovating
- Invoice from your renovation vendor
Loan applicants may send their application for their renovation home loan to the respective websites of the chosen lender. Usually, lenders and banks provide a hassle-free application process online for their loan customers.
Bear in mind that you should only apply to a licensed money lender in Singapore or a bank for the loan. This is to ensure that your rights to keep your confidential information safe are legally practiced.
With most banks, the loan amount will be disbursed to your chosen renovation contractors. Licensed money lenders, on the other hand, will disburse the funds to you or your designated account.
Tips for Choosing the Best Renovation Loan
- Evaluate your needs
- Research the options
- Compare interest rates and charges
- Check for hidden fees and charges
- Check for additional benefits
Case Study: Renovating a 3-Room HDB for a Newlywed Couple
Background:
Jack and Rose recently got married and moved into their new 3-room HDB flat. They are excited to start their life together in their first home, but the flat requires some renovations to make it more functional and comfortable. They have a budget of $45,800 to $55,700 for the renovation.
Renovation Plan:
To stay within their budget, Jack and Rose prioritize the essential renovations that will improve their quality of life while keeping costs reasonable. They plan to:
Install a false ceiling with concealed lighting in the living room and bedrooms to create a more modern and cozy ambiance. Estimated cost: $3,800 to $5,500.
Replace the old and worn-out flooring with new vinyl flooring throughout the flat. This will provide a more durable and easy-to-maintain surface. Estimated cost: $4,500 to $6,800.
Upgrade the kitchen by replacing the old cabinets with new ones, and installing new countertops, sinks, and taps. They also plan to add a glass backsplash to protect the walls from stains. Estimated cost: $10,000 to $14,000.
Add built-in wardrobes in the bedrooms to maximize storage space and reduce clutter. Estimated cost: $4,500 to $6,800.
Install new air-conditioning units in the living room and bedrooms for more efficient and comfortable cooling. Estimated cost: $4,500 to $6,800.
Renovate the bathroom by replacing the old tiles with new ones, installing a new toilet bowl, sink, and tap, and adding a new shower screen. Estimated cost: $5,000 to $7,500.
Paint the walls with a fresh coat of light-colored paint to brighten up the flat and make it feel more spacious. Estimated cost: $2,000 to $3,000.
Total Estimated Cost: $35,300 to $51,200
Contingency Fund:
To be prepared for unexpected expenses, Jack and Rose set aside a contingency fund of $10,000. This will help cover any unforeseen costs that may arise during the renovation process.
Final Budget:
With the contingency fund included, Jack and Rose’s final budget for the renovation is $45,800 to $55,700.
Conclusion:
By prioritizing the essential renovations and setting aside a contingency fund, Jack and Rose are able to renovate their 3-room HDB flat within their budget. They can now enjoy their first home together in a more comfortable and functional space that suits their lifestyle.
Here’s a table summarizing the renovation plan for Jack and Rose’s 3-room HDB flat:
| Renovation Area | Description | Estimated Cost |
|---|---|---|
| Living Room and Bedrooms | Install false ceiling with concealed lighting | $3,800 – $5,500 |
| Flooring | Replace old flooring with vinyl flooring | $4,500 – $6,800 |
| Kitchen | Replace cabinets, countertops, sink, and tap; add glass backsplash | $10,000 – $14,000 |
| Bedrooms | Install built-in wardrobes | $4,500 – $6,800 |
| Air-Conditioning | Install new units in the living room and bedrooms | $4,500 – $6,800 |
| Bathroom | Replace tiles, toilet bowl, sink, and tap; add shower screen | $5,000 – $7,500 |
| Walls | Paint walls with light-colored paint | $2,000 – $3,000 |
| Contingency Fund | Set aside for unexpected expenses | $10,000 |
| Total Estimated Cost | $35,300 – $51,200 | |
| Final Budget | $45,800 – $55,700 | |
Note: The estimated costs are based on industry standards and may vary depending on the specific materials and labor costs in the area.
Closing
Taking on a home renovation project is a huge commitment, not to mention expensive. As such, it is crucial to set a budget and prioritize your needs. Plus, take your time in comparing renovation loan plans before committing to a bank, lender, or financial institution.
Key Takeaways:
- The expected renovation costs for a standard 3-room HDB flat will set you back around S$45,800 to S$56,000.
- The average renovation loan interest rate is around 5.33% with a one-time upfront processing fee of between 0.75% and 2%.
- Borrowing from a licensed money lender is a good alternative since they offer flexible loan plans and can disburse cash within the same day.
Easily compare the best renovation loans from the top licensed money lenders in Singapore with Loan Advisor. A one-stop loan comparison platform, Loan Advisor offers biased-free and up-to-date information to help you make smart financial decisions. Request up to three loan quotes today!
