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4 Things To Look Out For In A Renovation Loan

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A renovation loan can supplement your savings when doing up your home. Learn how it works, what it can be used for, as well as key pointers to consider when shopping for a renovation loan.

Now that you’ve finally gotten the keys to your nest, it’s time to get the renovation works sorted so you can move in as soon as possible. In an ideal world, everyone would have enough savings to pay for their home renovation. For those of us who may be short on cash to pay for all the renovation and furnishings required, a renovation loan could be well worth looking into. 

Like its name suggests, a renovation loan is a loan specially designed for homeowners to fund their home renovation project. You do not have to rely entirely on a renovation loan to make your dream home a reality, of course. As a matter of fact, a renovation loan can supplement whatever savings you have mustered. 

How does a renovation loan work?

Renovation loans typically have lower interest rates compared to personal loans. With tenures ranging from one to five years, those who take up a renovation loan will be required to make monthly repayments over the course of their loan tenure. 

To ensure borrowers do not misuse the renovation loan, the approved loan amount will be disbursed directly to the renovation contractors in the form of a cashier’s order or multiple cashier’s orders. 

Site visits may also be conducted post-disbursement to make sure that proceeds from the renovation loan are used for the stated renovation works as illustrated in the quotation. 

What can a renovation loan be used for? 

You can use a renovation loan to pay for all things related to renovation, such as: 

  • Flooring and tiling
  • Painting and redecorating works 
  • Carpentry 
  • Electrical and wiring works
  • Basic bathroom fittings
  • Structural alterations
  • External works within the compounds of your home, such as the balcony, roof, backyard or front porch
  • Installation of solar panels

What can’t a renovation loan be used for? 

You aren’t allowed to use a renovation loan to pay for furnishings, household appliances, artwork, smart home devices, curtains and more. 

Key things to consider when applying for a renovation loan

#1 Promotional interest rate 

For anyone who’s looking to shave off the cost of their renovation loan, it is always a good idea to compare the various renovation loans available and keep an eye out for promotional interest rates that banks offer periodically. 

These days, banks like DBS/POSB and OCBC are also offering lower interest rates for customers who go green and commit to making their home more energy-efficient, eco-friendly and sustainable.   

#2 Processing fees

Aside from interest rate, pay attention to any processing fee that may apply to the renovation loan. Some banks charge a processing fee of 1% of the approved loan amount while others charge 1.5%. Some don’t charge any processing fee at all. 

#3 The maximum loan quantum available to you 

Besides doing your own homework to find out exactly how much you need to borrow to fund your renovation project, it is also important to be aware of how much you can actually borrow. 

When it comes to renovation loans in Singapore, the maximum loan amount available to borrowers is capped at six times one’s monthly income or S$30,000, whichever is lower. Also, you’ll need to have a minimum annual salary of S$24,000 to apply for a renovation loan. 

#4 Other fees and charges 

When shopping for a renovation loan, make sure you’re aware of the fees and charges that may apply under certain circumstances, such as overdue interest, late payment, early repayment and cancellation. 

Usually, the early repayment fee is set at 1-2% of the outstanding loan balance, so definitely take this into consideration when you’re figuring out the finer details of your renovation loan, such as your loan tenure, loan amount, as well as your ability to repay the loan. 

How to bring down your renovation costs

Like it or not, home renovation projects cost a pretty penny. While it’s nice to turn your Pinterest moodboards into reality, you need to recognise the importance of spending within your means to avoid racking up excessive debt. 

Comparison-shop your interior designers and contractors to get quotes before settling for 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 give them a good think. Here are some to get you started: 

  • Do you really need to hack the flooring when it’s already done? 
  • What about overlaying with laminate or tiles instead of ripping up the entire floor? 
  • Do you need to build so much carpentry? 
  • Do you really need to hack the walls? Is this your forever home? 
  • Are there less pricey materials that you can use?

While there are certainly ways to fund your home renovation project, it is still prudent to consider what you really need or want, and what is within your budget. After all, a dream home is built from the memories you make in it, not just the amount of money you spend on it.

Read these next
Ultimate Guide To Home Renovation In Singapore
How Much Should You Pay For A Home Renovation In Singapore?
How To Do Up Your Home Without Taking A Renovation Loan
Here’s How to Affordably Furnish Your House… Without Anything From IKEA
6 Essentials You’ll Regret Not Buying Before Moving into Your New HDB Flat


By Denise Bay
While Denise has a thing for travel, K-dramas, 0% sugar bbt (with boba!), Japanese cuisine and flat white, her curious nature means all sorts of random tabs are open on her phone 24/7. She doesn’t like to pay full price for anything, too.