Finding The Best Renovation Loan In Singapore: A Guide

The journey to your dream home starts with your renovation. Here are the best renovation loans in Singapore for you to consider.

You've finally gotten the keys to your new home and it's time to start thinking about renovations. New Built-To-Order (BTO) flat owners may want to follow their own unique definition of industrial chic to a T, whereas resale flat buyers may want a complete do-over for a brand new feel. Either way, renovations will cost you. So, before you look for renovation contractors to help you, you might have to think about renovation loans first.

Just like a personal loan, the key factors to consider are interest rates (including the Effective Interest Rate, or EIR), loan tenure, fees, and maximum loan amount. One other thing to note: if you already have an existing home loan with a bank, it may be worthwhile to get your renovation loan from the same bank.  They may offer a preferential rate and reduce the complexity of managing multiple loans. 

Table of contents

• What is a renovation loan?
• How do renovation loans work in Singapore?
• What is the eligibility criteria for a renovation loan?
• Fees and charges for renovation loans
• Renovation loans for public vs private housing
• What to look out for when choosing a renovation loan
• Using personal loans to pay for renovations
• How to calculate interest rates for renovation loans
• Bank loans vs in-house renovation loans
• Best renovation and personal loans in Singapore
  • Best for low interest with long tenure
  • Best for lowest annual income requirement
  • Best for ecologically friendly renovations
  • Best for lowest interest rate for large loans
• Frequently Asked Questions (FAQs)
• Conclusion

What is a renovation loan?

Renovation loans are loans typically offered by banks and licensed moneylenders that can be used to cover renovation works in your property. Renovation loans typically cover carpentry, cabinet installation, painting, wallpapering , tiling, sanitary fittings, and more. Interest rate for renovation loans range from 2% to 6% p.a..

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How do renovation loans work in Singapore?

Home renovation loans are a type of unsecured loans in Singapore. Compared to personal loans, they have some distinct features, such as:

• Maximum loan amount of S$30,000
• Provision of Cashiers’ Orders, which are used to pay your contractor or ID firm 
• Proof of renovation work, including official quotation or invoice from a renovation company, before-and-after photos, and even site visits
• Restricted to renovation work only; cannot be used to purchase furniture

Yes, renovation loans can seem restrictive, and we can only imagine why. But they do come with some advantages too. For instance, instead of paying your contractor in cash, you can issue Cashier’s Orders made out to your appointed renovation company. This can help you avoid being scammed. Also, home renovation loans allow joint applications with one other person, so couples can take on the debt together. 

However, homeowners can also use personal loans to fund their home renovations. Interest rates are competitive – even lower, as you’ll see –, there’s a higher loan cap, no quotation or invoice is needed, and there’s no restrictions on what you can spend the money on!

In fact, personal loans have become as capable as renovation loans, and homeowners can choose either one to finance their renovation works, according to their needs and preferences. How much do home renovations cost?

How much a home renovation costs will depend on the extent of the work you want done, as well as the materials and fittings you choose. An Italian marble kitchen counter is going to be markedly more expensive than, say, one made of mica. 

Often, how much to spend on your home renovation will also be influenced by the purpose of the renovation. Let’s consider two different scenarios. 

Read also: Should You Take an In-house Renovation Loan From Your Interior Designer?

Flipping and selling

If you’re looking to renovate an investment property, one meant to be rented out or sold quickly for a profit, it may not be prudent to spend too much. 

Here, your goal is simply to refresh the property and make any needed repairs so as to fulfil the needs and expectations of would-be tenants or buyers. 

You’ll also want to keep things basic to cater to a larger selection of prospective renters or homeseekers, so there’s no point investing in extensive renovations or alterations, nor splurging on expensive finishes that may end up ruined by careless tenants, or price your property out of the market for interested buyers.
 

Renovating your forever home

If, on the other hand, you’re renovating the property with a view of staying in it long term, then it’s more justifiable to apply for a larger home renovation loan.

You likely want to design your home to suit your needs, and style it up in a fashion that reflects your personal aesthetics. This may mean more extensive alterations, higher quality materials and fittings, and even designer furniture to complete the look. 

Read also: How To Do Up Your Home Without Taking A Renovation Loan

What is the eligibility criteria for a renovation loan?

While the eligibility criteria for renovation loans ultimately varies from bank to bank, there are certain common requirements including, but not limited to:

• Singapore Citizen or Permanent Resident
• Age 21-65
• Property in question must be owned by either the applicant of the applicant't related family member.
• minimum income of S$24,000-S$30,000 per annum. 

Do note that when borrowing from certain banks, such as Maybank, you may be subject to a credit evaluation as part of the approval process.

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Fees and charges for renovation loans

Typical fees you may encounter include:

• Cashier's order: around S$5
• Processing fee: typically around 1% to 1.25% of approved loan amount
• Cancellation fee: typically around 1% of approved loan amount, or 2% of outstanding loan amount
• Pre-payment fee: typically around 1% of approved loan amount, or 25 of prepaid amount
• Late payment fee: typically between S$30 to S$60

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Renovation loans for public vs private housing

Loans for private housing are typically offered with higher loan amounts and interest rates than those for public housing; renovation loan interest rates for private housing vary from 3.45% to 6.5% p.a., significantly higher than public housing's 2.5% to 5% p.a.. 

In addition to general renovations, renovation loans for private housing can cover solar panel installation as well as electrical and wiring works, a feature that is not available for public housing. 

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What to look out when choosing a renovation loan?

Similar to personal loans, interest rates, possible tenures, and additional fees are the primary factors to consider when choosing a renovation loan. To get the most out of your loan, you can even choose to consider the sign-up promotions offered by various banks to make your decision. 

Sustainable practices are also rewarded when choosing a renovation loan. The DBS Eco-aware Renovation Loan, for instance, has an attractive relatively lower interest rate (5.68% p.a. compared to DBS' regular renovation loan interest rate of 5.88% p.a.) and is only offered to customers who meet 6 out of the 10 items under the DBS Eco-aware Renovation Checklist.

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Using personal loans to pay for renovations

If you feel that a personal loan might suit your renovation needs better, you're not alone. Personal loans are often taken out to finance renovations, among other reasons. Most personal loans come with instant cash disbursement and higher loans amounts and tenures as well, so they are truly a viable option. Prime examles of this would be the DBS personal loan and CIMB personal loan which have a maximum loan amount of up to 10 times your monthly income and a maximum tenure of 7 years respectively. 

Best personal loans

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How to calculate interest rates for renovation loans

After choosing a renovation loan suitable for your needs, you can use renovation loan calculators online to determine the interest to be paid as well as your monthly payments. Certain banks, such as DBS and Maybank, offer their own renovation loan calculators for easier calculation.

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Bank loans vs in-house renovation loans

If this your first time hearing about in-house renovation loans, you're not alone. In-house renovation loans are far less common than any type of bank loans, and are not necessarily a better deal either. Renovation companies that offer in-house loans are often partnered with a financial institution or licensed moneylender, the latter being much more common. This often leads to in-house renovation loans being provided with higher interest rates and shorter tenures compared to bank loans.

Despite this, the biggest advantage of an in-house loan lies in its convenience. It is much easier to communicate with solely one party to arrange both your desired renovations and loan rather than contacting multiple companies or businesses to settle both your loan and renovation needs. 

Ultimately, ensure that you consider both convenience and your financial situation before opting for either a bank loan or an in-house renovation loan.

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Best renovation and personal loans in Singapore

Best for low interest with long tenure: HSBC Personal Loan

If you are looking for a low interest loan with long tenure, look no further than HSBC.

HSBC may not have a specialised home renovation loan at hand, but its personal loan would serve you well starting from 2.92% p.a. (EIR 5.50% p.a.) interest rate, given that annual income of applicants is S$30,000 and above. Even better news: processing fee is at an absolute zero for those who apply via SingSaver.

One other edge HSBC’s personal loan has over other banks’ renovation loans is the longer loan tenure allowance at up to seven years. If you are planning for a swanky renovation that requires a longer time horizon to finance, this may be the option for you. 

Minimum loan amount is S$1,000 and the maximum you can borrow is 4x your monthly income (applicable for annual salary of S$30,000 to S$119,999), or 8x if you are drawing S$120,000 and above.

Best for lowest annual income requirement: Standard Chartered CashOne Personal Loan 

With a guaranteed flat interest rate starting from 2.88% p.a. (EIR from 5.84% p.a.), the Standard Chartered CashOne Personal Loan is a solid low-interest option for homeowners.

Another attractive feature is its low annual income requirement of S$20,000 per annum, which puts this loan within reach for those with lower incomes. 
Standard Chartered charges a first year annual fee of S$199. From the second year onwards the S$50 annual fee is waived if all instalments for the year are paid on or before the due date.

You may borrow up to 4x your monthly salary or a maximum loan amount of S$250,000, repayable up to a maximum of five years.

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Best for ecologically friendly renovations: DBS Eco-aware Renovation Loan 

Make your home renovations ecologically friendly and enjoy preferential interest rates on your renovation loan.

This is possible with the DBS Eco-aware Renovation Loan, which offers interest rates as low as 5.68% p.a. (EIR 6.40% p.a.) when you take steps to reduce your carbon footprint when renovating your home. You’ll qualify if you fulfil at least six items on the 10-point Eco-aware Renovation Checklist.

This home renovation loan also comes with a processing fee equal to 1% of the approved loan amount, as well as insurance premium of 1% – the latter will pay off the outstanding renovation loan balance in the event of death or total and permanent disability.

Read also: Comparison: DBS vs Maybank Renovation Loan 

Best for lowest interest rate for large loans: CIMB Personal Loan

The CIMB Personal Loan is among the best choices for those seeking a large loan amount, thanks to its tiered structure.

If you’re borrowing S$10,000 and above – highly likely for most home renovations – you can access the most favourable interest rates of 4% p.a. (EIR 7.3% to 7.5% p.a.) for loan tenures of 1 or 2 years, and an even lower rate of 3.38% p.a. (EIR 6.32% to 6.38% p.a.) for tenures of 3, 4 or 5 years.

On top of that, loans of S$5,000 or more will see the processing fee of 1% waived off, helping you further save on borrowing costs.

As such, the CIMB Personal Loan could end up being the most affordable choice if you’re looking to borrow larger amounts over longer tenures.

Note that as this is a personal loan, there are no Cashier’s Orders included, but you could always purchase them from the Bank if needed to help you manage your payments to your contractor or ID firms.

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Frequently Asked Questions (FAQs)

Q: Can I use CPF to pay a renovation loan?

No. Unfortunately, CPF savings cannot be used to pay off a renovation loan. The CPF board even states that 'CPF savings cannot be used for renovation, improvement, or repair work for your property.'

Q: How much can I borrow for a renovation loan in Singapore?

S$30,000 is typically the maximum loan amount for renovation loans in Singapore. To fund more expensive renovation costs, consider taking up a personal loan instead. You may be able to borrow up to S$200,000 depending on the personal loan you choose.

Q: Can personal loans be used for renovation?

Yes. Personal loans can be used for to pay for any personal expenses including emergencies, medical expenses, home improvements, and even weddings. Personal loans are offered with a variety of tenures, loan amounts, and interest rates to serve your interests. You may even refer here to pick one that works best for you!

Q: Does HDB provide a renovation loan?

Unfortunately, HDB does not provide renovation loans. To fund home renovations, you may consider a renovation loan or personal loan from a bank. You can even check if your chosen renovation contractor offers in-house renovation loans.

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Conclusion: Financing for every home renovation

Between the many personal loans and renovation loans available, homeowners can find a wide variety of options for every type of home renovation. 

Even though interest rates for renovation loans (and personal loans too) are affordable, it’s important not to overspend when renovating your home. 

Be sure to check SingSaver for the best renovation loans, offers and promotions that give you value you won’t find anywhere else.