Singapore has a remarkable 91 percent rate of homeownership, with up to 80 percent of its population residing in public housing flats provided by the Housing Development Board (HDB).
As a result, home renovation has become an increasingly popular option in the country. The COVID-19 pandemic has further accelerated this trend, with many people spending more time at home and seeking to improve their living spaces for both work and leisure.
That said, funding a home renovation project can be a significant expense, and figuring out the best way to pay for it can be a challenge. Choosing the right financing option can save you costs and effort.
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Financing Options for Home Renovation Projects in Singapore
By exploring these options in detail, you can make an informed decision on the best financing option for your renovation project.
1. Renovation Loan
If you’re planning to renovate your home but don’t have enough cash on hand, getting a renovation loan can be a good option. Here are four of the best renovation loans offered by banks in Singapore:
| OCBC | Maybank | DBS/POSB | CIMB | |
| Minimum income requirements | $24,000 p.a. | $30,000 p.a. | $24,000 p.a. | $24,000 p.a. |
| Maximum loan amount | 6 times the monthly salary or $30,000, whichever is lower | 6 times the monthly salary or $30,000, whichever is lower | 6 times the monthly salary or $30,000, whichever is lower | 6 times the monthly salary or $30,000, whichever is lower |
| Loan term | 1 to 5 years | 1 to 5 years | 1 to 5 years | 1 to 5 years |
| Interest rate p.a. | OCBC renovation loan: 4.18%(EIR: 4.8%);Eco-Care renovation loan: 3.98%(EIR: 4.6%) | Existing home loan customers: 3.88%;New applicants: 4.98% | DBS/POSB renovation loan: 4,18%(EIR: 4.91%);DBS/POSB green renovation loan: 3.88%(EIR: 4,62%) | CIMB renovation loan: 3.88%(EIR:4.29%) |
| Processing fee | 0.5% of an approved loan | 0.5% of the loan amount | 1% of loan proceeds | 1% of the loan amount |
2. Personal Loan
Renovation loans have advantages for home renovation projects, but personal loans are a better option for those seeking flexibility in terms of how funds can be used, higher loan amounts, longer repayment periods, and more lenient eligibility criteria.
| Citibank quick cash for new applicants | DBS/POSB personal loan | Standard Chartered CashOne | UOB personal loan | |
| Minimum income requirements/12 x monthly income | $20,000 p.a, | $30,000 p.a. | $20,000 p.a. | $30,000 p.a. |
| Loan term | Up to 5 years | Up to 5 years | Up to 5 years | Up to 5 years |
| Interest rate p.a. | 3.45%(EIR: 6.5%) | 3.88%(EIR: 7.9%) | 3.48%(EIR:7.99%) | 3.4%(EIR: 6.42%) |
| Processing fee | 0 | $100 | 0 | 0 |
3. Home equity loans
You can finance your renovation costs by using your home property as a pledge instead of a home renovation loan. The benefits are a higher borrowing limit and a more extended repayment period, so you can reduce financial pressure by reducing each installment.
What’s more, changes in market interest rates won’t affect you as your equity loan plan is an interest-rate-and-payment fixed plan until a total pay-up.
4. Credit card loans
Credit card loan is another funding source for renovating your dream home. Banks offer generous rewards like shopping discounts, cash rewards, and repayment holidays when you borrow more of a loan.
Yet, you should understand a risk of a credit card loan. A bank charges higher loan interest than other loans if you cannot pay the monthly loan balance with interest. You should plan and regularly examine your repayment schedule to reduce interest costs.
5. CPF
CPF is a tax-advantaged account for savings for retirement, medical expenses, and life insurance. Yet, you cannot use the funds from the Central Provident Fund(CPF) to pay for home renovations due to the restrictions with the account.
But another account of CPF, called the investment account, is available to fund your renovation expenses. The fund is not loan money but your savings accumulated with tax benefits.
The advantage of using your savings instead of other home renovation loans is zero interest costs. Besides, you have no limit on loan amount regarding your savings.
CPF’s investment account is your first access to fund home renovations as the cost is zero because it is your savings, and you have no limit on the use and length of the funds. Second, you should choose loans with the lowest interest rates and flexible repayment terms if you have to borrow.
Good to Know
How does Renovation Payment Work?
Unlike other personal loans, a renovation loan differs in two aspects: loan distribution and loan interest calculation. Banks send approved loan proceeds to service suppliers concerning loan disbursements. Some major and popular renovation services paid for by the loan include:
- Tiling basic bathroom fittings
- Structural alterations and external works
- Basic bathroom fittings
- House flooring
- Electrical and wiring works.
A renovation lender calculates interest on the balance of an outstanding loan and a monthly basis rather than flat interest rates and loan tenure used by personal loans.
Besides, the maximum renovation amount is $30,000 or 6 times the annual salary(the lower of either). Sometimes a bank may charge additional fees for more loan disbursements.
Average Cost of Home Improvement Projects (For a 3-Room Flat)
The total renovation expenses you will spend depend on the flat size. Generally, the renovation costs for a new property are $14,500 for a new property and $32,000 for a resale one.
The table below illustrates breakdowns of renovation costs for a 3-room flat in Singapore:
| Services | Costs for a property |
| Carpentry | 30% |
| Ceiling partition | 7% |
| Electrical | 9% |
| Glass % Aluminium | 11% |
| Hacking | 7% |
| Masonry | 25% |
| Painting | 6% |
| Plumbing | 5% |
Tips: How to Save on Home Renovation Costs in Singapore
You may relieve your financial burdens by including the following tips on saving your renovation costs:
- Compare renovation prices offered by service providers.
- Use your savings like bank accounts or CPF’s investment account before resorting to loans.
- Select the best loan package based on interest rates, loan tenure, and loan amounts.
- Plan well for your renovation project to reduce unexpected events.
Wrap-Up
A well-planned home renovation creates an ideal living environment for you and your children for a long time. Besides service prices, you should consider and examine sources of funds in detail to plan an efficient renovation project.
Key takeaways:
- Use your savings before resorting to loans to reduce costs.
- Compare renovations based on interest costs, loan terms, and tenures, including other loan offers.
- Plan by looking at renovation works you require to reduce unexpected events.
If you’re considering getting a renovation loan, Fortune Credit is a licensed lender you can rely on.
Fortune Credit offers competitive interest rates and flexible repayment options, which can help you manage your finances more effectively. You can also enjoy fast loan approval and disbursement, allowing you to start your renovation project without delay. Apply now and get your cash today!
