Commonly asked questions regarding renovation loan

Renovation Loan FAQ

Applying for renovation loan is a common way for many homeowners in Singapore to renovate their home. I have previously written a post: Tips on renovation loan. Although the post helped many homeowners when they applied for their renovation loan, there are still many questions that homeowners wish to know. Therefore I am writing this post hopping that it will help all my readers. This post is assisted by my friend who works in the bank. Following are some of the commonly asked questions regarding renovation loan:

Why do banks reject my application?

Banker’s answer: Bank usually reject the loan either your repayment capabilities is not there or your repayment history is bad. Another common reason is the applicant does not have all the criteria that meet the bank’s guidelines/requirement.

What does it means to you?

It means that if you have bad credit history, you might not get a loan. It is just like applying for any other bank loan. In short, banks only lend to borrowers who has the ability to repay. If you know your credit history is not good but still wish to get a renovation loan, you can always try to apply. There is no harm trying. You might just get the loan approval. However, be mentally prepared that the bank will reject your application.

How do I improve my chance of getting a renovation loan?

Banker’s answer: To improve the chances of getting the renovation loan, do ensure that you are debt free. For example your credit card or credit line no outstanding payment or you have no past credit issue with any of the banks.

What does it means to you?

For most borrowers with existing debts, it will be difficult to be debt free. If you have the ability to clear your debt, you will most likely be able to pay your renovation in cash. In order to get the renovation loan while you are still serving your existing loans or outstanding payment, you can get a guarantor (who has good credit history ONLY) to help you with your loan application. If you default on your loan payment, the guarantor will have to pay on your behalf. Another way to boost up chances for your loan application is to apply the renovation loan with a joint applicant (who also need to have good credit history). In another words, you will need to partner with someone who has the ability (in the eye of the banks) to repay the loan.

How to apply for renovation loan that exceed $30,000?

Bankers’ answer: The maximum renovation loan based on the MAS guidelines is either $30,000 or quotation amount or 6x of monthly gross income whichever is lower. If you want to loan above $30,000, and if there are 2 owners of the house with both owners meeting the minimum requirements ($2,500 salary per month) for the loan, we can do a split application. Below is the illustration:

  • This is provided that renovation quotation is above $30,000.
  • Simple calculation will be wife(A) & husband(B) are homeowners. A earns $4,000, B earns $4,000.
    1. If Joint application will $30,000.
    2. Split application will be $4,000 X 6 = $24,000. $24,000 X 2 = $48,000
  • Another example is A earns $1,500, B earns $4,000
    1. 1st Application – joint,  $1,500 x 6 x 2 = $18,000
    2. 2nd application – single $4,000 x 6 – ($18,000/2) = $15,000
    3. Total loan will be $15,000 + $18,000 = $33,000

What it means to you?

It means that if you need more than $30,000 for your renovation loan, it is possible. The above renovation loan application method is the legal way of doing. You will be able to get $60,000 maximum. However, I have “heard of” another way of getting maximum loan (meaning above $30,000). The applicant can apply 2 or 3 loan at the same time from different banks. The banks approve the applications all at the same time. The applicant can sign all the loan agreements at the same time. This method is only possible if the applicant collaborate with the Interior Design firm. This is because at the end of the day, all the cheques will go to the Interior Design firm. This method is practiced among some Interior Design firm. Please find out more before proceeding with this method. Please do not quote me or my blog. I am just sharing what I “heard” from others.

What is the common issue that affect my loan application?

The most common issue is incorrect documentation submission. For example, not having the latest income documents or the  incorrect proof of home ownership.

What do it means to you?

If you want the approval fast, please submit the correct documents. Always check before submitting. The lead time for loan application due to incorrect document can be very long since the documents go thru many hands for approval.

For more Information about renovation loan, you can go to my previous post:

Tips on Singapore renovation loan


Blog about Interior Design, renovation and home improvement.

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