Renovating a condominium is never a stress-free experience, but it is worth the trouble. If you have never done it before, though, your misconceptions can make your project extra costly and frustrating.
To live through your condo renovation in Singapore without losing your sanity, let us first debunk the most common myths about it below:
A Personal Loan is the Best Source of Funds
Not really. Many lenders advertise personal loans to finance renovations, which is fair. However, these financial products are not exactly the best source of funds to budget for your project.
In a nutshell, personal loans and renovation loans both allow you to borrow up to six times your monthly income or $30,000, whichever is lower. In addition, both loans are payable within one year to five years. Their similarities end with the loan size and the loan tenure maximums.
A personal loan is a disadvantageous option when renovating your residence, for it involves higher interest. There are two explanations for this:
First, a personal loan lender is likely to charge you more interest because you can use the funds for whatever purpose. In contrary, a renovation loan lender is more comfortable imposing a lower interest rate since it is clear that you will be spending the money to improve an asset you own.
Second, monthly personal loan payments are higher. Although the amount is fixed, most of it goes towards the interest. Monthly renovation loan payments are different. They are also fixed but smaller, and most of them go towards the principal. The principal portion of the payment goes up over time while the interest portion decreases.
It can be difficult to see which loan is cheap if you base your calculations on the rate only. Ask about the amortisation schedule to find out the total amount you will ultimately pay.
A Renovation Loan Covers Everything
Another misconception is that a renovation loan provides all of the funds you need to turn give your space a makeover. That’s wrong. It can only be used for construction-related expenses. A lender will not give you anything more to let you buy new pieces of furniture and appliances. For non-construction costs, seek other financing options.
A Deposit Worth Over 10% of the Job is Reasonable
A reliable renovation contractor is financially stable enough to source supplies on credit. However, you will still need to put down some cash up front (as earnest money) to prove that you are a serious customer.
Generally, the deposit you are required to pay is 10% of the project’s estimated cost. Do not pay anything more since being paid after every major construction milestone incentivises a contractor to finish the job on time and properly.
Every Contractor Offers a Workmanship Warranty
Thinking that your prospective contractor will stand behind the crew’s work is a dangerous assumption. Read the contract to make sure that a workmanship warranty is part of what you will be paying for. Beware of the lowest bidders, as they usually charge less by not providing any insurance against construction-related errors.
Dispelling these myths will not make your condominium renovation hassle-free, but at least you can rest assure that your project will be a lot more convenient.