Are You Eligible For That Home Renovation Loan?
What is a home renovation loan?
A home renovation loan is meant to help you cover the renovation or remodeling costs for your home. Many of us consider renovating our homes because it will increase the market value of the house as well as the equity level.
What can you use a home renovation loan for?
You can apply for a home renovation loan if you are looking to carry out the following works on your home:
- Electrical works and/or wiring works.
- Adding built-in cabinets.
- Redecorating or painting works.
- Structural alterations.
- External works on your home but within your compound.
- Tiling and/or flooring works.
- Basic bathroom fittings.
Important Note – A home renovation loan cannot be used to pay for furnishings. You will have to apply for other loans or lines of credit if you wish to furnish your home.
Are you eligible for a home renovation loan in Singapore?
The basic requirement that most banks are looking for before approving your home renovation loan application is that you must be the owner of the property that you wish to renovate. However, there are some banks like DBS that allow you to take a renovation loan if a family member owns the property (such as a sibling, parent, spouse etc.) and you have taken their consent for renovating their property.
- Nationality Criterion - Usually banks in Singapore only offer home renovation loans to Singapore citizens and permanent residents.
- Age criterion:
- Minimum age - The minimum age required to apply for a home renovation loan in Singapore is 21 years.
- Maximum age – The maximum age to apply for this loan varies depending on the bank. Find below the maximum age for different banks in Singapore:
- CIMB Renovation Loan – 50 years.
- Maybank Home Renovation Loan – 55 years.
- RHB Renovation Loan – 55 years.
- OCBC Renovation Loan – 59 years.
- POSB Renovation Loan – 65 years.
- Loan Tenure – Usually, the loan tenure offered by banks in Singapore for home renovation loan starts at 1 year with a maximum loan tenure of 5 years.
- Loan Quantum – Most banks in Singapore offer a loan amount of up to 6 times your monthly income or S$30,000, depending on whichever of the 2 is lower.
- Minimum annual income criterion – The minimum income required by most banks in Singapore is S$24,000 per annum. However, RHB requires a minimum annual income of S$30,000 to be eligible for its Renovation Loan.
Fees and charges involved with applying for a renovation loan
Find below some of the common fees and charges applicable on home renovation loans in Singapore:
- Processing fee – It is also referred to as a handling fee or an administrative fee by some banks. Banks usually charge 1% of the approved loan amount as processing fee for this loan. Maybank is currently running a promotion where you will enjoy a discount of 50% on the processing fee if you apply for this loan online by March 31st, 2017.
- Cancellation fee – Banks in Singapore usually charge 1% of the approved loan amount or undisbursed amount as a cancellation fee for this loan.
- Late payment fee – Most banks charge S$80 for every late payment made on this loan.
- Insurance Premium – Some banks like POSB and DBS charge 1% of the approved loan amount as insurance premium. In case of your death, the insurer will pay off the outstanding balance on your loan to the bank.
- Prepayment fee – Banks charge between 1% and 2% of the prepaid loan amount as a prepayment fee on the loan.
- Cashier’s order fee – Banks charge between S$10 and S$20 per cashier’s order. OCBC offers 3 free cashier’s orders to their home renovation loan customers.
What documents do you need to submit to apply for a home renovation loan?
Banks in Singapore request for the following documents to be submitted along with the renovation loan application form:
- A front and back copy of your NRIC.
- Income documents for salaried employees:
- Computerized payslips for up to 3 months.
- CPF Contribution History Statements for the last 12 months.
- Latest Income Tax NOA (Notice of Assessment).
- Income documents for self-employed:
- Income Tax NOA (Notice of Assessment) for the last 2 years.
- Proof of ownership document for the property you wish to renovate such as Sales & Purchase Agreement, Title Deed/Certificate, CPF Property Withdrawal Statement etc.
- The original invoice or contract issued by your contractor that has yours as well as your contractor’s signature.
- If you are applying for this loan with a joint applicant, you must additionally submit a proof of relationship document such as a marriage certificate, birth certificate etc.
Banks in Singapore that offer Home Renovation Loans
The following banks in Singapore offer home renovation loans:
This is everything you need to know in order to evaluate whether you are eligible for a home renovation loan in Singapore.