Avoid Renovation Loans Singapore | Budget Renovations in Singapore

Loans | Renovation Loans
by Priyadarshini 6 June 2022

Breaking down walls (in your home) does not always imply breaking the bank. Having your own home implies that you wish to create a sense of stability in your life. In this state of mind, the prospect of taking out a $30,000 renovation loan after taking out a 25-year mortgage will make your palms sweat. Don’t get too worked up just yet. We tell you about how to renovate your first house without taking out a large loan. Let’s get started! Read about how to avoid renovation loans in Singapore.

Doing up a property from scratch, especially if you’ve just received your keys from the developer or HDB, might be prohibitively expensive. A 4-room BTO flat can cost upwards of $50,000 to completely renovate, not including appliances. Not to mention the numerous unanticipated and hidden costs that could occur during the restoration.

What exactly is a renovation loan?

A remodelling loan differs from a personal loan in that the interest rate is slightly lower – often between 4% and 6% per year. Renovation loans, on the other hand, are limited to $30,000 or six months of your income (whichever is lower). This budget may even be exceeded by your contractor. If this occurs and you do not have enough cash to pay, you will need to obtain a high-interest personal loan to offset the difference.

The point is that taking out a renovation loan is expensive, and the interest rate isn’t exactly inexpensive. So, how do you avoid using extra credit (on top of your home loan) while maintaining a cozy residence that represents your style?

Avoid Renovation Loans Singapore

How to Avoid Having to Take Out a Renovation Loan?

Let’s start with the obvious: if you save enough money, you won’t require a renovation loan. But that’s about as beneficial as suggesting you can lose weight by eating less or practicing more to compete in the Olympics.

Aside from the obvious, here are some practical methods to make your renovation inexpensive without taking out a loan:

Plan to pay over six months and then ask for an interest-free loan.
Employ a licensed contractor/interior designer.
Renovate in stages.
Reduce customization

Plan to pay over six months and then ask for an interest-free loan

Many financial institutions provide interest-free balance transfer loans (i.e. there is no interest charged during a certain tenure, after which the loan defaults to its usual rate). Balance transfers allow you to pay off your debt over a short period of time, usually 6 or 12 months, without collecting interest.

For instance, if the total cost of your renovation is $30,000, you can charge it to your credit card and apply for a balance transfer loan. You must then budget $5,000 per month for six months or $2,500 per month for a year at 0% interest (but keep in mind that you must pay an administrative fee for the loan – the longer the loan, the higher the administrative fee).

The risk with balance transfers is that the interest rate at the end of the six- or 12-month grace period will be greater than the maximum renovation loan interest rate of roughly 6% per year. To avoid this, you must be very certain that you will be able to complete all of your payments during the grace period.

Employ a Certified Contractor/Interior Designer

One typical reason people require a renovation loan is that they were taken advantage of by their former contractor or interior designer. Some consumers hire these so-called specialists because they are enticed by steep discounts and freebies. Then, halfway through, their contractor departs with their money or the designer tacks on a list of “surprise” expenditures they never saw coming. In either case, the budget is a shambles. Their only option for cleaning up the mess and/or getting a half-finished house fit for human occupancy is to take out a remodelling loan.

Renovate in Stages – Avoid Renovation Loans Singapore

Simply renovate the most important spaces first, such as the bedrooms, kitchen, and toilet. Then, later on, you can create a lovely living room, study, junior suite, and so on. Customers can renovate the critical portions first and then renovate the rest of the house. They save money in the meanwhile and don’t need to take out loans. All you have to do as a customer is resist the temptation of doing everything at once.

Reduce Customization

The majority of renovation expenditures are borne by two factors, not materials and labor. It’s more specific materials and customization. Labour costs can be relatively modest. It only becomes costly when you want a contractor with specialized expertise, such as a competent carpenter to build a unique revolving bookcase. The higher the cost, the more customized and distinctive the features you desire (and the more likely you are to need a renovation loan).

As much as feasible, have your contractor employ pre-made products that do not need to be created and built from the ground up. Avoid custom-built feature walls (for example, a simulated stone surface in the living room), kitchen islands, and walk-in closets.

The longer you wait, the less dependent you will be on remodelling loans

Finally, being a patient homeowner is the greatest approach to avoiding renovation loans. Remember, you don’t have to give up the home improvements you desire – you just don’t have to buy them all at once. Consider first renovating a tiny portion of your homes, such as one room or just the flooring. Then, when you can afford it, save your money and pay for the next improvement in cash. If you do this every six months to a year, you may acquire your ideal home in three years without taking out a single loan.

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