Renovation Loans

The Ultimate Guide to Renovation Loans in Singapore 2018

Renovation Loans Guide Singapore 2018

Joanne Poh

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Renovation is part and parcel of the Singaporean rite of passage of buying a first home (usually around the time of marriage). You will usually call up an interior designer so you can make it look less like a shoebox and more like your dream pad.

But obviously, having forked out so much money for your home purchase and, possibly, your recent wedding, many of you might be broke.

One solution is to take out a renovation loan to finance the transformation of your home. But what can you use the money from your renovation loan on? Can you use it to buy furniture from Ikea?

Renovation Loan

Contents

  1. What is a renovation loan?
  2. How do renovation loans work? 
  3. What can you use a renovation loan for? 
  4. Comparison of renovation loans in Singapore 
  5. Which renovation loans has the lowest interest rates? 
  6. DBS renovation loan
  7. Maybank renovation loan
  8. OCBC renovation loan
  9. CIMB renovation loan
  10. RHB renovation loan
  11. How to get the best renovation loan?

 

What is a renovation loan?

Renovation loan
Interest rate 2.88 to 5.8%
Loan tenure 1 to 5 years
Maximum loan amount $30,000 or 6 times your annual salary, whichever is lower

A renovation loan is really not that much different from a personal loan. The main advantage is that interest rates are usually substantially lower. That’s because you’ll be made to show proof of home ownership, which will incentivise the bank to give you a better rate. You must usually be either the owner of the property or a family member of the owner.

Loan repayment terms are usually in the region of about 1 to 5 years.

How much you get to borrow does not depend on your great interior design tastes, but your annual income. A low annual salary will most certainly affect the maximum amount you can borrow.

A typical maximum loan amount is $30,000, or 6 times your annual salary, whichever is lower.

The minimum income requirements are usually about $24,000 to $30,000 a year.

Given the fact that renovating your HDB flat can cost up to six figures, there is a high chance you’ll still have to fork out a large portion of the bill yourself.

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What is a Renovation Loan?

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What can you use a renovation loan for?

Renovation loans usually cannot be used on furnishings or furniture (some banks do, however, have another product called a furnishing loan for that purpose). Don’t start assuming that you can happily take out a renovation loan and then spend all the money on booze or Ikea Billy Bookcases.

They’re to be used strictly for the renovation of your flat. That usually includes things like:

  • Electrical and wiring
  • Painting and papering the walls
  • Flooring and tiling
  • Carpentry such as building and installation of cabinets and cupboards
  • Structural alterations
  • Works on external parts of the property, including roof or fences
  • Fittings such as bathroom heaters

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What can I use a Renovation Loan for?
 

How do renovation loans work?

Getting a renovation loan is a simple matter of applying online, on the phone or in person. Banks have slightly varying requirements, but you typically need to bring the following documents:

  • NRIC
  • Proof of income, e.g. CPF statement, payslips
  • Proof of property ownership, e.g. HDB sales order
  • Contractor’s invoice
  • Proof of relationship between joint applicants, if applicable

You need to decide how much you want to borrow (loan amount), and for how long (loan tenure). Most banks have a renovation loan calculator so you can estimate how much you need to pay per instalment.

Once your loan is approved, the bank will pay the contractor your approved loan amount (after deducting processing, insurance and any other fees) on your behalf. It can be all in one shot or split into multiple cashier’s orders. You might be charged admin fees if you choose the latter option.

Note that renovation loan disbursements are made in the name of your contractor – not you. You won’t be able to cash out the money and use it on your own expenses.

Also, banks may arrange for site visits to make sure nothing fishy is going on.

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How do I get a Renovation Loan?

 

Top 5 renovation loans in Singapore

Bank loan Monthly interest rate (5 year loan)
DBS renovation loan 4.38% (existing home loan customers)
4.88% (non-home loan customers)
Maybank renovation loan 2.88% (existing home loan customers)
4.33% (minimum $15,000 loan, 4 year loan tenure)
OCBC renovation loan 4.98% (home loan customers)
5.37% (non-home loan customers)
CIMB renovation loan 4.85%
RHB renovation loan 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.

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Which renovation loan has the lowest interest rates?

If you already have a Maybank home loan, lucky you. You can get the cheapest renovation loan in Singapore, at only 2.88% p.a. interest.

Otherwise, RHB has the cheapest home loans at 3.68% p.a. interest for loan amounts <$15,000 and 2.98% for >$15,000.

Of course, interest rates change all the time, so make sure to check the rates out again before you commit.

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Renovation Loan Comparison
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DBS renovation loan

DBS renovation loan
Eligibility Singaporean Citizens or PRs aged 21 to 65 years old. You need to be the owner of the property; otherwise, you have to be a direct relation (parent, spouse, child or sibling) and have the owner’s consent. If you are a single applicant, you need to have a minimum income of $24,000 p.a. For joint applications, the main applicant (you) needs a minimum income of $24,000 p.a. AND your joint applicant (your parent, spouse, child or sibling) needs a minimum income of $12,000 p.a.
Loan amount $5,000 to $30,000 (or 6 times your monthly salary, whichever is lower)
Loan tenure 1 to 5 years
Interest rates 4.38% (existing home loan customers)
4.88% (non-home loan customers)
Other fees Handling fee of 1% of the approved loan amount, plus 1% more for insurance.

If you change your mind and cancel your loan after it’s been approved, there’s a cancellation fee of 1%. Alternatively, if you decide to pre-pay your entire loan, you can do so but there’s ALSO a pre-payment fee of 1%.

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Maybank renovation loan

Maybank renovation loan
Eligibility Singaporean Citizens or PRs aged 21 to 55 years old (upon loan maturity). You need to be the owner of the property.

If you are a single applicant, you need to have a minimum income of $30,000 p.a.

For joint applications, there needs to be a combined income of $30,000 p.a., with the main applicant earning at least $24,000 p.a.

Loan amount $5,000 to $30,000 (or 6 x your monthly salary, whichever is lower)
Loan tenure 1 to 5 years
Interest rates 2.88% (existing home loan customers who apply online)

4.33% (non-home loan customers who apply online. Minimum $15,000 amount and at least 4 years loan tenure. Otherwise, you’ll incur the current board rate of 8.5% p.a.)

Other fees Processing fee of 1% of the approved loan amount.

If you cancel your loan after it’s been approved and before the money is disbursed to the contractor, you will be charged 1% of the amount.

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OCBC renovation loan

OCBC renovation loan
Eligibility Singaporean Citizens or PRs aged 21 to 59 years old. You need to be the owner of the property.

If you are a single applicant, you need to have a minimum income of $24,000 p.a.

For joint applications, at least one of the applicants must earn a minimum income of $24,000 p.a.

Loan amount $5,000 to $30,000 (or 6 x your monthly salary, whichever is lower)
Loan tenure 1 to 5 years
Interest rates 4.98% (existing home loan customers)

5.38% (non-home loan customers)

Other fees Admin fee of 1% of the approved loan amount + $200 processing fee.

If you decide to pre-pay part of the loan in advance, you’ll be charged 2% of the pre-paid amount. And if at some point you want to redeem the entire loan fully, you’ll be charged 2% of the outstanding loan balance.

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CIMB renovation loan

CIMB renovation loan
Eligibility Singaporean Citizens or PRs aged 21 to 50 years old. You need to be the owner of the property. If you are a single applicant, you need to have a minimum income of $24,000 p.a. Joint applicants can combine their incomes to meet the $24,000 p.a. requirement.
Loan amount $5,000 to $30,000 (or 6 x your monthly salary, whichever is lower)
Loan tenure 1 to 5 years
Interest rates 4.85%
Other fees Processing fee of 1% of the approved loan amount. If you change your mind and cancel your loan after it’s been approved, there’s a cancellation fee of 1%. CIMB also offers free home insurance of up to $80,000 and up to 3 free cashier’s orders for split disbursements.

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RHB renovation loan

RHB renovation loan
Eligibility Singaporean Citizens or PRs aged 21 to 55 years old. Either the main or joint applicant must be the owner of the property.

Main applicants must have a minimum income of $30,000 p.a.

Joint applicants must be an immediate relative and be gainfully employed. If BOTH applicants earn $30,000 p.a. each, your combined salary can count towards the maximum loan amount.

Loan amount $5,000 to $30,000 (or 6 x your monthly salary, whichever is lower)
Loan tenure 1 to 5 years
Interest rates RHB offers a flat rate (interest charged on original loan amount) and a monthly rest package (interest is charged on loan outstanding amount).

For the former, interest is 3.68% p.a. on loan amounts below $15,000 and 2.98% for loan amount from $15,000 to $30,000.

For the monthly rest package, interest is 5.8% p.a.

Other fees Processing fee of 1% of the approved loan amount.

If you change your mind and cancel your loan after it’s been approved, there’s a cancellation fee of 1%, capped at $200.

If you decide to pre-pay part of the loan in advance, you’ll be charged 2% of the pre-paid amount. And if at some point you want to redeem the entire loan fully, you’ll be charged 2% of the outstanding loan balance.

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How to get the best renovation loan?

Do your research: Use MoneySmart’s free renovation loan wizard to compare interest loan rates.

Check with the bank where you’re getting your home loan: Banks often extend more favourable interest rates to renovation loan applicants if they’re already existing home loan customers. But don’t assume these rates are necessarily more attractive than other renovation loans on the market.

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Guide to Renovation Loans Singapore

Have you ever taken out a renovation loan? Share your experiences in the comments!

 

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.