After you buy a new property, you need to renovate it to make it a comfortable home that is done up according to your preferences.

But extensive renovation works can put a dent in your pocket and affect your cashflow.

A home renovation loan can help you get those five-figure home makeovers without breaking a sweat and affecting your monthly budget.

The average cost of home renovations in Singapore can easily hit a five-figure amount, while some may even exceed $100,000.

In such cases, a renovation loan can help you fulfill your plans comfortably.

So find out how to apply renovation loan in this article.

What Is A Renovation Loan?

Fortunately, many Singapore banks and licensed money lenders provide easy renovation loans to help homeowners new and old alike.

A renovation loan is an unsecured loan that is used solely to fund home renovations for new and existing homes.

The repayment time for a renovation loan ranges between one to five years. The loan amount is usually about $30,000, or up to six times a borrower’s monthly income.

Why A Renovation Loan May Be Useful

After you have decided that your house needs a major renovation, be it a paint job, plumbing, light fixtures, or new cabinets and flooring, you need to determine the total cost you are likely to incur on your planned renovation.

You need to then assess the source of funds required for the extent of planned home renovations.

If you have extra cash on hand, that would be ideal. If not, your next best bet is to borrow the required amount from a reliable lender, then pay back a fixed amount each month. This ensures you are not burdened with a high cost at one go.

Even if you have the required cash on hand, opting for a renovation loan might be the better choice for your personal finances. It can save you from diving into your emergency funds, and you can have some cash saved aside for an emergency.

What To Consider Before Getting A Renovation Loan

Before you think about how to apply renovation loan and fill out an application for a home renovation loan in Singapore, you must consider some relevant factors that may affect your decision.

Here are some points to consider before you opt for a renovation loan:

Loan Quantum

The loan quantum is an important point to consider, as some banks and licensed money lenders have a minimum loan amount that you can borrow. Some lenders may require a home renovation loan amount to be at least $10,000.

Interest Rates

Perhaps the most worrying factor borrowers are concerned about is the interest rate. And rightly so, as a high interest rate can easily add up, in addition to the loan principal you borrowed.

The interest rate for a renovation loan is usually 3-4%. It is important to note that the monthly interest rate may not be equal to the effective interest rate.

Some banks and licensed money lenders also offer discounted interest rates, or throw in fee waivers to make their loan offers more attractive. But these special rates often end in a few months, so read the fine print carefully.

Always calculate all applicable fees and interest rates to have a realistic picture of the amount of money you have to repay before signing a loan contract.

Additional Fees

There are often extra costs you need to take into consideration.

For instance, a fixed percentage of a processing fee, an administrative fee, an insurance fee, and late fees when you are unable to repay your monthly installment on time.

The processing fee is often 1% of the principal loan amount.

Choice Of Loan Provider

If you are a new homeowner who previously acquired home loans or bridging loans to help supplement the amount, then it would be a smart move to apply for a renovation loan from the same provider, whether it is a bank or a licensed money lender.

Some banks may offer discounts on their home renovation loan packages. This could help you save 0.5% on the total amount.

Budget Constraints

Even though you would be applying for a loan, and will not be paying it back at once, it is wise to draw up a budget.

Don’t get carried away – opt for only the most necessary renovations. Shop around and check out what banks and licensed money lenders are offering, then get the best deal.

What Can You Use A Renovation Loan For?

There are certain restrictions on what you can and cannot do with a renovation loan in Singapore. So before you find out how to apply renovation loan, it is best to first check if you would be able to spend on what you need.

A renovation loan in Singapore can be utilised for the following:

  • Building cabinets
  • Wiring
  • Electrical upgrades
  • Getting fresh paint or wallpapers
  • Altering house structures
  • Plumbing
  • Bathroom fittings
  • Getting new flooring or tiling work

A renovation loan cannot be spent on buying air-conditioners or refrigerators, getting new furnishings, or curtains or sheets. You also cannot use a renovation loan to buy electrical appliances such as washing machines, kitchen gadgets, or home entertainment systems.

In other words, only work that essentially involves changing the structure of a home, and not the appliances and household items used in a home, can be paid with a renovation loan.

Eligibility Criteria And Maximum Loan Amounts

When applying for a renovation loan in Singapore from a bank, a pristine credit record, and a good credit score are prerequisites to obtain the said loan.

The maximum loan amount you can get for a renovation loan is up to six times of your monthly income, capped at $30,000. If you apply for a personal loan, you may get up to $250,000 based on your income and repayment ability.

You may be wondering “what is the maximum amount I can borrow for home renovations, and what are the interest rates?”

The good news is that renovation loans often have a significantly lower interest rate as compared to personal loans, but the loan amount you get is also lower.

The repayment period is usually extended to a maximum of five years, both in the cases of a personal loan or a renovation loan.

It is highly recommended that you work out the amount of loan you can repay comfortably every month before signing any renovation loan contract.

How To Apply Renovation Loan From A Bank

When you plan to renovate your home, you must calculate all costs the renovation will incur.

There is a highly useful resource called a renovation budget calculator that is available on most banks’ websites.

After you have a rough estimate from your renovation budget calculator and confirm that you qualify for a home renovation loan, look for a trusted contractor.

Shop around for budget-friendly but reliable interior designers and renovation contractors that can quote you an exact price you will need to pay to achieve that dream home you’ve always wanted.

Do not rely on a single contractor for the quote – it is wise to ask various vendors so you get an estimate of the amount you need to apply for.

Next, collect the required documents for your renovation loan application. Most banks require your identification documents such as your NRIC, proof of employment and income, proof of home ownership, and the latest IRAS Notice of Assessment.

Once everything is in order, submit all the documents to the lender. Upon approval, you will receive a letter from the bank.

It is important to note that renovation loan disbursements are made out to the name of your contractor, and not you. That means you won’t be able to cash out the amount and use it for other purposes.

How To Apply Renovation Loan From A Licensed Money Lender

Another option you have to acquire a renovation loan is reaching out to a licensed money lender.

A list of licensed money lenders is available on the website of the Registry of Moneylenders, which is governed by the Ministry of Law.

All licensed money lenders are required to adhere to strict terms and conditions for lending money.

Similar to a bank loan, you would need your NRIC, as well as proof of income, employment, and home ownership, and a quote from a licensed contractor, to apply for a renovation loan from a licensed money lender in Singapore.

Confirming the authenticity of your money lender is the most crucial step before you sign off on any contract. Check the contact details of the money lender against what is stated on the list.

Other things to consider when choosing a licensed money lender is to negotiate and settle for the best deal you can get – in terms of interest rates, additional fees, and the repayment period and terms.

Personal Loan Vs Renovation Loan: Which Is Better For You?

As mentioned previously, the interest rate for a renovation loan is  lower than that of a personal loan (up to 8%). But you can use a personal loan for anything, not just a home renovation.

You can choose either – it all depends on your renovation needs and cost, and your personal preference.

Decide between a greater amount and interest rates, or a lower amount and interest rate – and therefore, greater repaying flexibility.

Both types of loans have a maximum five-year repayment period. Before you decide on the loan amount you require, calculate how much you can comfortably repay each month, without digging another debt hole for yourself.

Always factor in your monthly expenses, the loan repayment amount, interest rates and any additional fee to get a realistic picture.

An additional few hundred dollars each month may not seem like a burden at first, but can quickly put a dent in your savings down the road if your total debt exceeds your monthly budget.

Choose The Right Renovation Loan And Lender

If you want to apply for a renovation loan with a licensed money lender, ensure you do not get caught up in fraudulent and illegal practices, or loan sharks.

It is highly advisable to consult only licensed money lenders and banks for a home renovation loan.

Good lenders will clearly inform you of all the additional expenses, terms and conditions, and repayment period before asking you to sign off any contract.

A reputable licensed money lender like Lending Bee will also help you work out the best deal, with low interest rates and easy payback installments suited to your needs.

So don’t wait years to build your dream home. Buying your own property was a feat in itself, and you shouldn’t have to worry about turning it into the ideal abode.

With Lending Bee, you can apply for a home renovation loan at the click of a button.

Get in touch with us now or apply for a loan using your Singpass today. It just takes five minutes.

About Ashley Sim

Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.