Now that the COVID-19 pandemic is almost over, you may be thinking about making changes to your home, whether you just moved into a new place, want to make it easier to work from home, or are making a nursery for a new baby. Any of these things could be making you think about remodeling.
Almost everyone agrees that remodeling costs a lot of money, no matter what the situation is. The industry seems to have a standard value in the five-figure range, and some major renovations can cost more than $100,000.
If you want to get a loan for home improvements in Singapore, the following information is very important for you to know.
What is a renovation loan and how work?
A home renovation loan can only be used to pay for the costs of making changes to an existing home or building a new one.
After the loan has been approved, a processing fee equal to one percent of the approved loan amount and an insurance premium equal to one percent of the approved loan amount are both due and will be taken out of the total amount of the approved loan.
Because of how the insurance premium is set up, if the insured person dies or becomes totally and permanently disabled, Manulife will pay off the remaining balance on the renovation loan.
Then, Cashier’s Orders will be used to move the money from the lender to the different contractors (s).
Even though the most Cashiers’ Orders that can be issued is four, you will be charged S$5 for each Cashier’s Order after the first one that you request. This fee will be taken out of the loan-service account you’ve chosen.
Also, you would have to pay fees if you cancelled, paid ahead of time, or paid late. The fees for each of these situations are listed in the table below.
So, it would be smart to choose a loan package that fits your needs and your finances to make sure you can pay off the loan on time and avoid these fees.
Also, site checks will be done after the loan has been paid out to make sure that the money from the loan was used to do the renovation work that was listed in the quotation.
If you want a loan that can only be used for home renovation, you should look into home i renovation loans instead of personal loans.
How is renovation loan helpful?
If you are a first-time homeowner, you would have paid a lot of money for your down payment, and now you may find yourself short on cash (especially newlyweds who had just hosted their wedding).
Since you don’t have much money, you might want to put off building your dream home and cut back on the renovations you are doing.
But if you want to make more changes to your home after you’ve moved in, it’s usually a hassle because you have to move out your old furniture or rent a place to stay while the work is being done. If you plan to make more changes to your home in the future, keep this in mind.
Why not speed up the process by getting a loan for home renovation and starting your renovations earlier?
If you already own a home, working from home might not be the best way to get things done. Before the epidemic, you might have thought of your home as a place of peace and comfort, a place to get away from the stress of your job. But the pandemic changed everything.
If your hybrid work arrangement has become permanent, it might be a good idea to upgrade your home to make it more work-friendly. This will give you a place to work that is separate from the rest of your home.
This could be done by making the place where people work more pleasant. To say it again, a home renovation loan could be a good way to fill a gap in your cash flow.
To get a renovation loan, you must follow a very specific policy about how it can be used. That policy says that the loan can only be used for renovations that are meant to last for a long time.
Because the interest rate on a home loan is more publicized than the rate on a personal loan, many people think that these loans have very high interest rates.
But since interest rates are calculated in different ways, the effective interest rate for a home improvement loan is lower than that for a personal loan.
The interest rate that is displayed on a loan for home renovation is typically presented in the form of a monthly rest rate. This indicates that the interest is computed based on the current balance of the principal amount owed on the loan.
For a personal loan, on the other hand, the interest rate is stated as a flat rate, and the interest payments are based on the total amount borrowed.
It makes sense to compare the two. Assuming a loan amount of S$30,000 and an interest rate of 3.88% over the course of a 5-year loan, the total interest payment for a renovation loan with a monthly rest rate will be S$3,052, but the total interest payment for a personal loan with a flat rate will be S$5,820.
When the loan for home improvements was taken out, this meant that $2,768 in interest was saved.
What to consider when taking up a renovation loan
You should figure out how much your renovations will cost and make a budget. Then, you should get a loan for your renovations in an amount that is reasonable for your situation so that you don’t put too much stress on your money.
Before you start planning your renovation, check out the current deals. This will help you figure out what kinds of changes you can make to your home and still get the lower loan rates that the promotions offer.
How much does it cost to fix up a house in Singapore?
On average, it costs Singaporean couples between S$50,000 and S$60,000 to make their homes look as nice as possible.
Most of this money goes toward home repairs. This is also how much it usually costs to remodel a four-bedroom HDB apartment.
Executive condominiums (ECs) usually have lower remodeling costs, ranging from S$20,000 to S$30,000, because they already have a kitchen, closet, and toilet built in.
If you bought an apartment that was already lived in, you will need to find a way to get the money you set aside for home improvements.
Even though resale apartments are often well-equipped, they often need more extensive renovations than BTO apartments because they may need more fixing and taking apart.
You will also need to add between S$20,000 and S$30,000 to your budget for the house makeover to cover the cost of buying furniture and electronics. Most of the time, the price depends on what kind of furniture you choose.
If you want to spend less money, you might want to order your furniture from IKEA and put it together yourself. You and your partner or other family members can get closer by making furniture together.
Should you think about getting a personal loan first?
If you need money for home renovation, you shouldn’t get a personal loan first. Instead, you should look for home loan. The annual percentage rate of interest on personal loans is usually higher than the rate on renovation loans, which is usually between 3 and 4%.
If you do a courtesy check-in with the banker you applied for the remodeling loan with, she may be able to get you a period of time without having to pay interest on the loan if you take advantage of the occasional special offer.
If you decide to get a loan to pay for renovation, the bank will want to see the first estimate that your contractor gave you.
But it’s possible that a loan for home repairs won’t be enough to cover the full cost of the repairs.
Most renovation loans in Singapore have a cap of $30,000 and can’t be more than six months of the borrower’s salary. It’s possible that this won’t be enough to pay for everything that needs to be done.
