Hi all, not too sure when should I choose to take a home reno loan? Don’t like the feeling of ‘debt’ but some people say you should just take it? Not sure what’s the thought process behind that. TIA!? - Seedly
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Anonymous

Asked 2w ago

Hi all, not too sure when should I choose to take a home reno loan? Don’t like the feeling of ‘debt’ but some people say you should just take it? Not sure what’s the thought process behind that. TIA!?

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Hi Anon!

You’re right, there are actually two schools of thought behind this.

  1. Take the home reno loan if…

📈 You believe that you are able to grow your money at a faster rate than the interest charged.

Based on the current market (Information accurate as of 12 Sep 2020) the loan interests can range from 2.88% to 4.33%, with a tenure of 1 to 5 years. This is also dependent on, whether you have an existing home loan and which bank you are borrowing from. 💰

So, this basically depends on how confident you are of beating the prevailing rates.

2) Don’t take the loan if…

🌞Your investment horizon is way longer than the tenure or if you only want to spend what you can afford.

//

💸 But if you don’t take the loan, and don’t have enough money.... Then how? Don’t renovate ah?

I mean, of course you should try to cut unnecessary spendings on the renovation, but I also strongly believe in investing in a comfortable future home and the benefits of it. 🏡

  • 💰 Start saving early - You (and your partner) can start setting aside a fixed amount every month that can be dedicated to your future (home).

  • 📈 Alternatively, you could use this money to invest as well, but alas, this brings us back to the first question, how confident are you that you are able to grow your money at a faster rate and are you able to afford a possible loss?

If you have any other questions, feel free to check out or ask our ‘Renovations’ community!

Hope this helps! All the best! 👍​​​

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