A home renovation loan gives homeowners the funds they need to make repairs to their properties. This is a loan that is not secured; Since there is no collateral required, you will not need to put up anything. Put, taking out a home improvement loan will not put your home in jeopardy.
It’s critical to distinguish between a home renovation loan like renovation loan Singapore and a home equity or refinance loan. These loans are more like mortgage loans because they take longer to repay, have higher interest rates, and are not open-ended. Furthermore, compared to home remodelling loans, they are more difficult to obtain.
Before accepting a home remodelling loan, lenders require you to detail the desired maintenance job. Are you considering repainting the house, repairing the roof, updating the electrical system, or adding additional extensions or plumbing lines, for example? The sum you can borrow for renovations differs from one creditor to the next, so it’s a good idea to shop around.
Processes Of Getting A Renovation Loan?
Renovation loans are seen by lenders as low-risk products to sell because the borrower will own a house, which is a prized asset in Singapore. Due to the requirement of a personal guarantee, failing on the loan would jeopardize the borrower’s new home during the first year of occupancy. That’s not a good omen!
This is why banks adore the concept of homeowners having their house loans and renovation loans from the same lender. Apart from the economic motive, owning both obligations give the lender more leverage if the homeowner’s financial situation deteriorates.
Loan Costs For Renovations
Because a bank wants to be the lender of both loans like loan Singapore, it will frequently provide a discount on renovation loans to customers who already have a home loan with them. However, even without special or promotional rates, home remodelling loans have low-interest rates compared to other forms of consumer credit and loan products. This is mainly because, unlike a personal loan, where the borrower can use the cash for whatever he likes, a renovation loan is used to pay for house upgrades, which, as previously said, can boost home equity.
A slew of administrative fees can be levied against the borrower and withdrawn straight from the loan funds, resulting in a lesser disbursement amount. This indicates that it can impact the quantity of the money borrowed.
It’s also possible that the bank will charge a fee for each contractor to pay and each payment made, even if it’s the same contractor. These fees can sometimes appear to be modest in terms of cash. When you translate these to a percentage of the loan amount, though, you could be surprised.
The interior designer or contractor would be paid a cheque (or cashier’s order) upon loan approval. The money would be disbursed following the achievement of certain milestones to ensure that the money borrowed can be used for upgrades. The builder, contractor, or interior designer must also submit an official quotation or invoice when applying for a renovation loan. This is, so the lender will know exactly how much money is required to complete the renovations. The bank doesn’t take it lightly when using the fund. This is why they would only sanction finance for operations they had already approved.
These can include the following:
- Cabinets and other built-in fixtures
- Electrical and painting work
- The installation of flooring is completed.
- Renovations to toilets, for example.
Because different lenders have varying loan requirements, it’s best to double-check with your lender to see what activities are permitted. In case you’re wondering, renovation loans do not cover the purchase of furniture or electrical items. At the very least, big merchants are still selling them in instalments. Finally, get quotes from at least three different contractors so you may choose the one that gives you the best bang for your buck. Just because you can receive a construction loan quickly doesn’t mean you shouldn’t be careful with your money.
Know more about renovation loan at Crawfort SG.