Renovation loans are used when you wish to renovate or improve your existing home such as painting, adding an extra room, redecorating, and electrical works and so on. Several banks in Singapore offer packages that include a home loan and a home renovation loan wherein you will enjoy lower interest rates. POSB is one such bank offering a loan package that includes both these loans.
What Can You Use a Renovation Loan for?
Here are some common uses of renovation loans in Singapore:
- Painting walls.
- Electrical works or wiring.
- Flooring and tiling.
- Built-in cabinets.
- Bathroom fittings.
- Any other external work within the compound of the house.
Note: Unless otherwise specified, you may not be eligible to use a home renovation loan for home furnishing purposes.
Personal Loan vs Renovation Loan
Many wonder if it is easier to apply a personal loan for the purpose of home renovation and improvement instead of a home renovation loan. However using a personal loan for renovation purposes is not ideal and here’s why:
- Personal loans have higher interest rates when compared to renovation loans. The average Effective Interest Rate (EIR) of personal loans as offered by banks in Singapore is above 8% p.a. On the other hand, you can get renovation loans for under 6% (CIMB offers EIR of 4.85% p.a.).
- Personal loans charge higher processing fees in comparison to renovation loans. Personal loans charge a processing fee of around 2% to 3%, whereas renovation loan processing fees are as low as 1%.
- Many banks offer additional perks when applying for renovation loans. For instance, OCBC offers 3 complimentary cashier orders upon applying for this loan. Maybank offers 25% discount on processing fees.
Features and Benefits of Renovation Loans in Singapore
Find below some common features and benefits offered by banks on their renovation loan products:
- You can borrow up to 6 times your monthly income OR S$30,000, depending on whichever of the two is lower. Some banks may have a minimum loan amount for their renovation loan (for example, OCBC requires you to borrow a minimum of S$5,000).
- The loan tenure starts from 1 year and extends up to 5 years for renovation loans.
- Some banks give you the option of applying for a renovation loan separately or along with their home loan package that offers additional benefits.
Renovation Loan Interest Rates
Here are the interest rates and monthly repayment packages offered by some popular banks in Singapore:
||Effective Interest Rate (EIR)
||5.11% p.a. to 8% p.a.
||S$186 to S$854
||5.11% p.a. to 8% p.a.
||S$186 to S$854
||S$187 to S$847
||7.27% p.a. to 8.60% p.a.
||S$197 to S$864
Fees and Charges for Renovation Loans in Singapore
Here are the additional fees and charges imposed on renovation loans in Singapore:
Processing fee or handling fee – Banks usually charge 1% of the approved amount as processing/handling fee for this loan.
Cancellation fee – Usually 1% of the withdrawn/cancelled amount is charged as a cancellation fee by banks.
Late payment fee – Several banks charge S$80 per late payment made on the renovation loan. Certain other banks such as RHB charge this fee in the form of a percentage (5% above the PLR or Prime Lending Rate on the overdue amount).
Partial prepayment fee – Most banks in Singapore charge 2% of the prepaid amount as a partial prepayment fee. Not all banks allow partial prepayment of this loan.
Full redemption fee/full repayment fee – Banks in Singapore usually charge 2% of the outstanding loan amount as a full repayment or redemption fee.
Cashier’s order fee – Each cashier’s order may be charged from S$10 to S$20. Banks such as OCBC and CIMB offer complimentary cashier’s orders up to a certain limit.
Banks Offering Renovation Loans in Singapore
Here are the popular banks that offer renovation loans in Singapore:
Eligibility Criteria to Apply for Renovation Loans in Singapore
If you are interested to apply for a renovation loan in Singapore you need to meet certain eligibility criteria that includes but not limited to the following:
- Most banks offer renovation loans to Singapore citizens and Permanent Residents only.
- Age requirement:
- Minimum age – 21 years.
- Maximum age – 65 years (offered by DBS and POSB).
- Income criterion – Minimum annual income of S$24,000 is required to apply for a renovation loan.
- Single and joint applications are allowed. Joint applicants must usually be related to the main applicant in the form of spouse, child, parent, sibling, etc.
- Salaried employees, self-employee, variable income employees and commission-based earners are eligible to apply for renovation loans.
Documents Required to Apply for a Renovation Loan in Singapore
You will be required to submit certain documents to complete your renovation loan application that includes but not limited to the following:
- Photocopy of NRIC (both sides).
- An invoice or quotation provided by your contractor signed by you (the applicant) and the contractor.
- Income proof documents may include the following:
- Computerized payslips.
- CPF Contribution History statement.
- Income Tax NOA (Notice of Assessment).
- Other documents include:
- Proof of ownership document for the house you wish to renovate such as CPF property withdrawal statement, Sales & Purchase Agreement, HDB approval letter, property tax bill, Certificate of Title for private properties, etc.
- In case of a joint application, proof of relationship document such as a marriage certificate, birth certificate, etc. may be requested.
- Address proof documents such as a utility bill, bank statement, cable bill, etc. may be requested.
How to Apply for a Renovation Loan in Singapore?
There are several ways to apply for a renovation loan in Singapore. Here are some common ways to apply that are offered by many banks:
- Online application – You can apply for a renovation loan online by visiting the respective bank’s website. Some banks require you to fill an online application, upload the relevant documents and submit the application. Other banks may require you to download the application form, complete the form, attach the required documents and mail it to the bank for approval.
- Call the bank – You can start the application process by calling the respective bank and speaking with a representative. You can also clear any queries you may have regarding their renovation loan.
- Fill up a contact sheet – Some banks have a contact form or an enquiry form which can be filled online and submitted. Such forms request your personal and contact details based on which a representative from the bank will contact you to start your application process.
- Visit the bank – You can visit your nearest bank branch where you want to apply for a renovation loan, speak with a staff representative, fill-in the application form and provide the required documents.
Renovation Loan Calculators
To make the process of applying for a renovation loan easier for you, several banks in Singapore offer renovation loan calculators (or home loan calculators) so you can calculate your monthly repayments on the loan. Such calculators typically require you to enter details such as your loan amount and your repayment period. Your results may include your monthly repayments, the total interest charged, your total repayment, etc.