ST Explains: What to consider when taking a loan to fund home renovation

by Albert02

ST Explains: What to consider when taking a loan to fund home renovation

ST Explains: What to consider when taking a loan to fund home renovation. Most people consider acquiring an apartment to be a significant financial investment, and making renovations to your new home may present the unsettling potential of accumulating further debt at a time when interest rates are rising. Renovation prices can go into the tens of thousands of dollars, depending on the complexity of the job, so how are you going to pay for it?

Because Central Provident Fund funds and Housing Board loans are exclusively accessible for home purchases, you cannot buy an apartment. You might get a remodeling loan, which is an unsecured debt, meaning you don’t have to put up any collateral and the bank can’t seize any of your belongings if you fall behind on payments.

DBS Bank, CIMB, Maybank, and OCBC Bank offer renovation loans, although RHB stopped offering them this year due to a lack of demand. The annual interest rate for a loan of up to $30,000 with a five-year term ranges from 3.88 percent to 4.88 percent. Green remodeling loans are also available from DBS and OCBC, with borrowers receiving a 20 to 30 basis point decrease for installing eco-features such as energy-efficient lighting or ceiling fans instead of air conditioners, as well as switching to a green electricity vendor.

Existing DBS and Maybank home loan clients who apply for a remodeling loan are eligible for additional benefits. DBS HDB home loan customers who apply for a renovation loan by the end of this month will receive a free multi-cooker.

According to Mr Erik Ligtenberg, chief operating officer of Singapore-based online loan comparison service Lendela, borrowers should read the tiny print on renovation loans. “Renovation loans are special in that they involve additional expenses such as a personal expense charge for transferring funds directly to your contractor and an additional fee penalty if your cashier’s order limit is exceeded,” he stated.

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