Asked on 24 Apr 2019
This is a very important question for most Singaporeans to consider, especially since the majority of us will end up calling an HDB flat, home in the foreseeable future.
Why Am I Buying The HDB Flat?
Before we talk about home renovation and home renovation loans, you need to consider why are you buying the HDB BTO in the first place.
1) Buying To Sell
Are you planning to buy the HDB flat, hold it for its Minimum Occupation Period (MOP) then sell it in hopes of upgrading to, say, a condo?
FYI: for an HDB flat, you must occupy it for a minimum period of five years before you can sell the flat in the open market.
If yes, then you wouldn’t want to spend so much on renovation.
2) Buying Your Forever HomAre you planning to buy the flat and make it your ‘Forever Home’?
Then you’ll probably want to spend a little bit more money to make it nicer since you’ll be living in it for a long time.
Yeah... Preferably NOT like that...
How Much Money Do I Need For Renovation?
This is highly subjective and dependent on the aesthetic that you’re going for.
1) Buying To Sell
If you’re planning to sell the flat in a couple of years, then you wouldn’t want to pour too much money into it. But hey, you’ll still need to live in it in the meantime so you’ll probably need to do some minor renovations.
Let’s say you wanna go budget and don’t really care about creating a “dream home”. Then maybe you’d like to consider opting in for HDB’s Optional Component Scheme (OCS).
FYI: Not THAT OCS tho.
What the OCS offers will differ between housing projects and can cost anywhere from $5,000 and up. For reference, the OCS for my 4-room HDB BTO (in a relatively mature estate) that was completed in 2017 costs $8,000 to $9,000 – depending on the types of fitting you choose.
It's also important to remember that you have to opt for your OCS upon selecting your flat. Which means that it'll be 3 to 5 years before you see your flat. And by then, you might change your mind with regard to what you want your place to look like. #justsaying
I've had plenty of friends who went for the OCS only to decide that they would rather overlay tiles or change out the doors and shower sets for something more their style. And that means extra cost.
2) Buying Your Forever Home
Now comes the hard part: saving and budgeting.
If you plan on creating a home with built-in carpentry like kitchen counters and wardrobe cabinets, floors with homogeneous tiles, and maybe get some electricals and wiring done…
Basic stuff really.
Be prepared to set aside at least $40,000 (this is based 4 room BTO reno prices which my friends have paid). For reference, the renovation for my place was more than $60,000. I've got friends who paid even more...
You can definitely achieve a lot for lesser depending on what you prioritise.
But I’ve seen what ‘lesser’ can get you, so at least find a contractor or ID who you really trust or has really good after sales service.
So... Should I Take A Home Reno Loan?
There are two schools of thought:
1) Take The Home Reno Loan
Take the loan if you believe that you can grow your money at a much faster rate than the interest charged. Looking at the market rate now, loan interest usually ranges between 2.88% to 5.8%, with a tenure of 1 to 5 years.
Basically, this will depend on how confident you are at beating the prevailing rates when you apply for a home renovation loan.
The fact that you would like to do up your house nicely is also an equally valid reason, albeit within a reasonable budget of course. Because technically, this would be more of a want than a need.
2) Or… Start Saving Now
I didn’t take a home reno loan because my investment horizon is way longer and I wanted to only spend what I could afford. Call me old fashioned or conservative but I didn’t want the nagging feeling of owing the banks more than I have to.
So how did I do it? I started early.
5 years early to be exact – remember that I said I collected the keys to my home in 2017?
When my wife (then girlfriend) started her first job, we decided that we would each put $1,000 aside every month. At that point, we decided that this amount would be saved for our future.
Naturally, we wouldn’t have known how our relationship would work out, but it’s an amount that we decided is good enough. The caveat being this was for a future, with or without the other individual: 5 years x $2,000 = $120,000.
With this amount, we had more than enough to cover her university school loan, our wedding, our honeymoon, and of course, our home reno.
The more investment inclined readers will point out that it’s a lot of money which could be put towards growing a portfolio, and that’s true.
But at the same time, nothing beats having a peace of mind when it comes to paying for big-ticket items like these.
More About Home Reno Loans
If you'd like to read more about the existing home reno loans in the market and which is probably the best one for you, Seedly has a pretty good article which you should check out: https://blog.seedly.sg/renovation-loan-interest-rate-singapore/