A home renovation loan can add to your home renovation savings. Find out how it works, what it can be used for, and what important things to consider when buying a home improvement loan.
Now that you’ve finally received the keys to your nest, it’s time to sort out the renovations so you can move in asap. In an ideal world, everyone would have enough savings to pay to renovate their home.
For those of us who may be short of cash to pay for all of the required renovations and fixtures, a home renovation loan might be worth a look.
As the name suggests, a home renovation loan is a loan that is specifically designed for homeowners to finance their home renovation project. Of course, you don’t have to rely solely on a home renovation loan to make your dream home a reality.
In fact, a home renovation loan can complement any savings that you have made.
How does a home renovation loan work?
Home improvement loans typically have lower interest rates compared to personal loans.
With a term of one to five years, those taking out a home renovation loan will have to make monthly repayments over the course of their loan term.
To ensure that the borrowers do not abuse the renovation loan, the approved loan amount is paid directly to the renovation companies in the form of a cashier order or multiple cashier orders.
Site visits may also be conducted after the payout has been made to ensure that the proceeds from the renovation loan are used for the specified renovation work, as shown in the listing.
What can a home renovation loan be used for?
You can use a home renovation loan to pay for all of the home renovation-related things, such as:
- Flooring and tiles
- Painting and renovation work
- carpentry
- Electrical and wiring work
- Basic bathroom fittings
- Structural changes
- External work within the connections of your home, such as the balcony, roof, backyard or porch
- Installation of solar panels
ALSO READ: 4 Parent Costs To Consider When Renovating A Home
What can a renovation loan not be used for?
You are not allowed to use a home renovation loan to pay for furniture, home appliances, artwork, smart home devices, curtains, and more.
Important Things to Consider When Applying for a Home Improvement Loan
1. Subsidy interest
For anyone looking to cut the cost of their home renovation loan, it is always a good idea to compare the different home renovation loans available and keep an eye on the special interest rates offered by banks on a regular basis.
Nowadays, banks like DBS / POSB and OCBC are also offering lower interest rates for customers who are environmentally conscious and are committed to making their homes more energy efficient, environmentally friendly and sustainable.
2. Processing Fees
In addition to the interest rate, note the processing fee that may apply to the home renovation loan.
Some banks charge a processing fee of one percent of the approved loan amount, while others charge 1.5 percent. Some do not charge a processing fee at all.
3. The maximum amount of credit available to you
In addition to doing your own homework to figure out how much to borrow to finance your home renovation project, knowing how much you can actually borrow is also important.
When it comes to home renovation loans in Singapore, the maximum loan amount available to borrowers is capped at six times monthly income or $ 30,000, whichever is lower.
You also need a minimum annual salary of $ 24,000 to apply for a home renovation loan.
4. Other fees and charges
When purchasing a home renovation loan, be aware of the fees and charges that may apply in certain circumstances, such as: B. Overdue Interest, Late Payment, Early Repayment, and Cancellation.
Typically, the early repayment fee is one to two percent of the outstanding loan balance. So be sure to take this into account when figuring out the more specific details of your home renovation loan, such as: B. Your repayment term, loan amount, etc., as well as your ability to repay the loan.
How to lower your renovation costs
Like it or not, renovation projects cost a pretty penny.
While it’s nice to bring your Pinterest mood boards to life, you need to understand the importance of spending within your means to avoid running into excessive debt.
ALSO READ: Ultimate Guide to Home Renovation in Singapore
Compare your interior designers and contractors for quotes before deciding on one.
Instead of borrowing a huge sum just so you can have your dream home, consider your priorities very carefully.
Ask yourself difficult questions and think about them well. Here are a few to get you started:
- Do you really need to chop the ground when it’s already done?
- What about covering with laminate or tiles instead of tearing open the entire floor?
- Do you have to build so much carpentry?
- Do you really need to hack the walls? Is this your home forever
- Are there any less expensive materials that you can use?
While there are certainly ways to fund your home renovation project, it is wise to consider what you really need or want and what is in your budget.
After all, the memories you make will build a dream home, not just the money you spend on it.
This article was first published on SingSaver.com.sg.
