Have you ever had a moment of bliss while sitting contentedly at home, sipping tea, nice and cozy, while enjoying the familiarity of your surrounds? The Scandinavian have a word for the love of home, hearth and household – it’s called hygge. The spirit of hygge is catching on across the globe, and it was only a matter of time that it would come to Singapore.
After all, who better to love their home than us Singaporeans? Thanks to Housing and Development Board (HDB) flats, our enviable home-ownership rate, at more than 91 per cent, is one of the highest in the world. Taking pride in where we live, most of us will at some stage consider a renovation to beautify our home. The rise in popularity of home renovation shows, the rising prices in HDB resales (recently by 127.3 per cent) and the trend of more people enjoying indoor living and hygge has seen an increase in people’s interest in interior design, renovations and home improvements.
It is particularly difficult to remodel your property on a tight budget, and you can sit around and save up for some changes or you can change your home and mindset right now. That’s where UK Credit can come in to help you create the living environment you’ve always dreamed of with a renovation loan to make this possible?
What is a Renovation Loan?
In a nutshell, a renovation loan is taken out to remodel, renovate or repair your home. The bank will allow you to borrow money to improve the condition of your property. It is possible to do this before you buy a new house as additional capital after closing a mortgage or you can take out a renovation loan for your existing home. There are different types of home improvements which can be done and approval may vary depending on the work which is needed.
Most people think that renovation loans are for major rehabilitation on a previously existing property, however UK Credit offers such loans for a vast range of products.
A renovation loan can come in handy as you renovate your home in one of four categories of home improvement:
- Minor Renovations
These are simple cosmetic jobs and DIY projects around your home, such as painting walls, replacing lighting fixtures and door knobs, changing air conditioning units, etc. For minor renovations you don’t need to build new walls or tear down old ones. You may not even need to call in a professional to do the job.
- Major Renovations
These are massive changes to your HDB flat, condo or landed property where you may remove a kitchen, demolish an old structure and rebuild a new built-in, etc. For these jobs, professional builders, plumbers, electricians and all manner of technicians will be called in to complete the job. Some of these jobs may require HDB approval.
- Complete Rebuild
To knock down the entire landed house and rebuilding it completely, you will need more money. You will need a licensed builder and a contract showing structural renovations being planned in order to get an approval.
- Extensions and additions
You may need to hack a wall for extra space or create false ceilings, and you will need to ensure you have HDB approval. In many cases, you need a licensed builder and a contract to proceed with these extensions.
The process varies when it comes to getting a renovation loan according to the type of remodeling you plan to do. Minor renovations can be rapidly approved; however, it can take longer to qualify for larger projects which require a contractor and conveyancer.
You can either get a fast cash renovation loan for quick minor repairs or one where payments and flexible repayments are stretched over a longer duration.
Why take a Renovation Loan?
Property owners in Singapore are spoilt for choice when it comes to the type of loans available to them for renovations. They can take out personal loans, use credit cards or adjust their home mortgage. It is important to look at interest rates when making decisions about home improvements.
Renovation loans are advantageous because they are cheaper and more flexible than other options. Furthermore, they can be approved more easily, depending of course on the size of the renovation.
A renovation loan has numerous benefits. These include:
- Greater borrowing capacity
You can borrow a higher amount when taking out a renovation loan as the bank does not calculate the money you can borrow according to the current value of your property but on the expected worth of your upgraded home once it is complete.
- Fix up an old home
Let’s face it, vintage homes have charm, character and appeal which modern homes lack. A renovation loan will allow you to fix up features which are hard to find these days in order to surround yourself in old world charm.
- Lower interest rates
When you take out a mortgage and then a renovation loan, you will have a lower rate of interest and a longer time frame to repay the loan.
- Tax deductions
Home loans are not tax deductible in Singapore, however property owners can make a tax claim for any repairs and maintenance renovations made on properties when they have tenants. As a property owner, you can’t claim for the building of a new feature wall, however you can make a tax claim for minor renovations such as patching holes in the wall or replacing lighting fixtures.
- Adds value
There’s nothing like a renovation to add to the resale value of your home. By taking care of your home over time you can ensure you get the best possible return when the time comes to sell it. Furthermore, if you’re interested in flipping homes, a renovation loan can make it possible to renovate and resell at a higher price to make a profit.
When it comes to deciding whether to move to a new home or just fix up your existing accommodation, the latter is always cheaper and more convenient when you factor into account the cost of moving as well as the value which a renovation will add to the price of your home.
There are many pros when it comes to taking out a renovation loan in order to upgrade your property, however renovations are never easy and there are a number of factors to consider when making a decision. Below are some handy tips:
- Due diligence
When taking out a renovation loan, as is the case with any money you borrow, there’s always a risk and you need to be aware of the shortfalls. Do your due diligence and ask yourself the following question: Will the increase in value justify the renovation? Put pen to paper and factor in all the costs which you may incur.
- Take it slow
Too often people are quick to apply for a renovation loan even before they have completed the purchase of their new home. It is advisable to refrain from rushing into extensive renovations you think you might need upon first encountering a property. Take your time to live in it first and identify key areas which require urgent modelling as well as those which can wait. When you take your time, you can make wiser decisions when it comes to design choices.
- Stick to a budget
Prepare your budget and stick to it. It is important to have a ballpark figure to set aside, but there are so many variables when it comes to the cost. Too often people run out of money in the middle of a project because they have either not factored all costs into the total budget (eg permits, hidden costs etc.) or ended up buying expensive fixtures and other extras which made them stray from their initial estimation. It is important to include all aspects of the project in the budget and to stick to it. While it may be tempting to opt for luxurious extras such as expensive door knobs etc., it may be better to plan for these later down the track and get the bulk of the project finished according to the set budget.
- Plan for unexpected
Renovations are like weddings. Something is always bound to not go as initially planned. A broken pipe here and an unforeseen financial expense there might bump you off track even with the most accountable financial management.
- Get a permit
Once you decide what you wish to do, make sure you check the HDB guidelines to ensure that your renovation doesn’t require approval. Without the relevant paperwork you may be forced to undo your changes while also bearing the brunt of the cost. Once you submit your application, approval usually takes a week but it is best to apply for permits two weeks in advance, especially if you are going to do a lot of hacking as this may take longer for permission to come through. Even without a permit, there are certain considerations you will be required to make. It is important to know and plan for these in advance.
- Use professionals
While it may be tempting to use friends and family to help you renovate, larger scale renovations require qualified contractors both for the purposes of safety and economy. A reputable professional from the HDB’s Directory of Renovation Contractors will help you budget by giving you an upfront costs, calculating these in a comprehensive quotation. In the long run, going to a reputable contractor can not only save you money but also increase the chances of having your renovation loan approved.
Am I Eligible for a Renovation Loan?
Are you full of interior design ideas for your home but don’t know where to begin? Let’s address the elephant in the room by looking at how much money you can borrow for your renovation and whether you qualify for a renovation loan.
Firstly, let’s look at how much your renovation will cost? Studies show that most renovation loans in Singapore range from $10,000 to $100,000 and vary according to whether you want to renovate a HDB flat, condo or landed house. Other factors that determine the cost of the reno include the age and condition on the property, the work you want to do and the type of materials required. Renovation platform Qanvast can help you roughly estimate the cost of a reno before heading to a contractor.
Once you have a rough estimation of the costs involved, there are a range of renovation loans to choose from depending on your individual needs. You can have a fast-track loan to pay off in a lump sum or stretch loan repayments over a 36-month period.
UK Credit will discuss your options and fees, interest rates and other costs to find the best possible product to serve your requirements. We can calculate principal repayments to suit your finances.
Below are the factors which UK Credit takes into account when assessing your eligibility for approval:
- The level of your finances;
- The nature and cost of the renovations;
- The resale value which the planned renovations will bring to your home.
To get a renovation loan approved by us, you need to gather all your paperwork. Here is what you will need:
- Offer proof of ID, including your age and citizenship status.
- Get a written quote from a certified contractor listing the work you will get done on your property in detail. To strengthen your case, your contractor would need to provide an objective view as to why the renovations are beneficial.
- Gather proof of property ownership for the home which you intend to renovate.
- Finance records: Salaried employees will need to show their latest pay slip, a CPF statement showing contributions for the last three months and their most recent income tax statement. Non-salaried employees will need to show the last two months of their bank statements, ACRA documents and their most recent tax statement. Self-employed business owners should supply proof of their capacity as sole proprietors and company owners.
Once you are ready, you can start your application with us either in person or online. Our loan officers are available to assist you.
Upon approval you can sign the agreement and receive funds required for your renovation on the spot.
A renovation may seem like an arduous and expensive process, and we’d be lying if we said it was easy. However, with our easy-to-understand terms and willingness to be by your side financially throughout the home renovation process, you may find that it is possible to have the lifestyle you’ve always wanted but never thought you could afford.
At UK Credit, we believe that nobody should have to live in a leaky, dilapidated home facing extensive damage and dated decor. All you need for this is some correct budget planning and financial assistance to give your home a facelift and bring a sense of warmth and hygge into your life.
Are you ready to make changes in your space and life? With a renovation loan from UK Credit, it is possible. We’re here to help. Contact us for a quote and assistance.