When you have your own home, more often than not there is no escaping renovation. Whether you want to change the look of your home or you have no choice but to renovate due to poor conditions, it is in no way an inexpensive affair. However, if you play your cards right and pick the right loan to satisfy your renovation needs, you might even save a couple of bucks.
Many leading banks in Singapore offer flexible financing options to customers for their renovation loans. Working in such competitive environments, banks have no choice but to offer the lowest rates so they are seen as a more desirable option than their competition.
Loan Amount for a Renovation Loan:
Most banks in Singapore give an option of loan amount of up to 6 times your monthly income OR S$30,000, depending on whichever of the two is lower. Some of the banks that provide this option as their loan amount are as follows:
- DBS Bank
- POSB
- CIMB
- Maybank
- OCBC
- RHB Bank
Loan Tenure:
Most banks in Singapore offer flexible loan tenures for their renovation loan. You can apply for a renovation loan on the island for a loan tenure ranging between 1 year and 5 years. However, longer the loan tenure, the higher will be the interest you will be paying on the loan. Additionally, if you are looking to repay your loan earlier than the agreed upon date/tenure, you may be imposed a prepayment penalty fee which will be a percentage of your loan amount.
The following are some of the banks in Singapore that offer a loan tenure between 1 year and 5 years:
- DBS Bank
- POSB
- CIMB
- Maybank
- OCBC
- RHB Bank
Interest Rate Structure:
Interest rate is one of the most important components when taking a loan of any kind. Renovation loan is no different to this. There are two types of interest rates that banks in Singapore offer for their Renovation loan – fixed interest rate and variable interest rate.
Fixed Interest Rate is also referred to as a flat rate structure wherein the instalment amount to pay each month will remain the same. Those who are more comfortable in knowing exactly how much they need to pay each month can opt for a renovation loan with a fixed interest rate.
Variable Interest Rate on the other hand is often pegged to another rate or a base rate and the rise or fall of this rate will determine what the interest rate will be for the loan tenure. Variable interest rates in Singapore are pegged to one of the three – SIBOR (Singapore Interbank Offered Rate), SOR (Singapore Swap Offer Rate) or the bank’s rate. If the variable interest rate is pegged to the bank determined rate, it is more likely to be higher than when pegged to SIBOR or SOR. Variable Interest Rate structure is beneficial to those who have a higher cash flow and liquidity of assets and looking to repay the loan early.
Tip: When looking up the interest rate structure offered by the bank, make sure to check the EIR or the Effective Interest Rate which will be the actual rate of interest you will be paying which includes other factors such as processing fees and any other fees involved in the loan.
Fees, Penalties and Other Charges:
Renovation loans are no strangers to additional fees and charges. Most banks in Singapore impose fees and charges and penalties on their renovation loans. Some of these charges are as follows:
- Processing Fee – This fee is typically deducted upfront.
- Administrative Fee
- Partial/Full Prepayment Fee
- Cashier’s Order
- Late Instalment Fee
- Cancellation Fee
- Handling Fee
- Insurance Premium
- Disbursement Fee
- Restructuring Fee etc.
Eligibility Criteria for Renovation Loan in Singapore:
All banks have eligibility criteria depending on which they accept or reject a renovation loan application. The following conditions must be satisfied by individuals interested in applying for a Renovation Loan:
- There are many banks that offer their Renovation Loans to Singapore Citizens, Permanent Residents and Foreigners. However, there are banks such as DBS bank and POSB that offer their Renovation Loan only to Singapore Citizens and Permanent Residents.
- Applicants must be at least 21 years of age to apply for a Renovation Loan in Singapore. The maximum age however differs. For instance CIMB offers this loan for up to the age of 50 years, Maybank offers this loan for up to the age of 60 years and POSB and DBS Banks offer this loan for up to the age of 65 years.
- The annual income criteria to apply for a renovation loan in Singapore typically varies between S$24,000 and S$30,000.
- Other eligibility criteria such as minimum loan amount can be imposed depending on the bank you are applying to.
- Documentation Requirement for Renovation Loan in Singapore:
The following are the typical documents that you will be required to submit to any bank in Singapore when applying for a Renovation Loan:
- A front and back copy of your NRIC for Singaporean Citizens and Permanent Residents.
- A copy of your passport, Employment Pass/S Pass etc. for Foreigners.
- The completed application form.
- A proof of ownership document confirming that you own the property you want to renovate.
- Additional documents such as utility bills, bank statements, and cable/internet bill etc.
- If you are applying as joint applicants, you must provide a document showing the proof of relationship such as a Marriage Certificate, Birth Certificate etc.
- Income documents to be submitted include computerized payslips/commission statements, CPF Contribution History, Income Tax NOA (Notice of Assessment) etc.
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