If you’re buying a resale HDB flat, is there a need to renovate the place? The irony of the answer to the question is that, if the house had been liveable for the previous owner, there is basically no need for one to renovate a pre-loved flat. However, the flat could be old (like the 20 year-old flat Mr Salty bought), or you simply want to erase any trace of the previous owner.
Other than deciding whether and how much to renovate your house, there’s also a need to consider other factors, like whether you can afford to pay for the loan. If not, can you afford to take a renovation loan and pay for it? Last, but not least, what are the documents that are required to process the loan?
What and How Much to Renovate?
Unlike new houses like BTO, where one has to renovate everything from scratch, there’s the possibility for us to just work on some parts of the resale flat. This is especially so when we’re considering the carbon footprint of the renovation. When we decide to replace the kitchen cabinets, we are not just incurring carbon footprint for the new cabinet, but also the old one. There’s the effort to knock it down, transport the waste and burn the waste. It is even worse when we consider that most of the furniture we own was supposed to last us for decades, not just a few years.
Of course, there is the other consideration of money, which we will talk about in the next section. Unless we are filthy rich, there’s a limit on how much we can spend on renovation. The fact that we are buying HDB, much less resale, flats speak a lot about our spending capability.
Important Fixtures to Change
The most important goal of renovation is to make sure that the house is fit and comfortable for us to live in. For example, since Mr Salty hates the hot and humid weather, it is therefore important to change out the old aircon that the previous owner used for 20 years. Other than changing to a new and more energy efficient aircon system, Mr Salty also fitted heavy, blackout curtains in the bedrooms where he will use the aircon in. This way, the room is well insulated and puts less stress on the aircon.
Another important work to be done for a 20 year old flat was re-laying the electric circuits. Believe it or not, wires wear out and it was recommended for one to re-do the wiring for the whole house once every 20 years or so. However, this usually means that the wires that were hidden in the walls will now be exposed, since HDB no longer allows contractors to hide new wires during renovation.
Mr Salty didn’t overhaul his whole toilet. Instead, he only changed out the toilet fixtures – toilet bowls, basins and shower system. These are items that we would be in close contact with daily. Well, Mr Salty didn’t want to sit on a toilet bowl that the previous owner sat on for 20 years! That would make his toilet no different from a public toilet! At the same time, changing the fixtures made his toilets look brighter and like new!
Wardrobes were not high on Mr Salty’s priority. He had bought IKEA shelves and installed other open concept shelves in the bedrooms. However, for the Master Bedroom, he got the ID to build a custom wardrobe. He needed a place for his clothes and he thought using an old wardrobe, which already smelled mouldy, would do his clothes injustice.
Optional Fixtures to Change
These are fixtures that cost a lot of change, but wouldn’t really have a big impact on our daily lives. For example, since HDB inspected and passed the windows before the flat was handed over, Mr Salty saw no need to change the windows. Yes, they looked dated with the dark bronze trimmings and frosted glass linings, but he could always cover them with curtains or blinds.
Another big item was the kitchen cabinets. As we all know from the older post, Mr Salty replaced the old cabinets with IKEA Kitchen Cabinets. He was mainly concerned that the old cabinets could be harbouring insects’ nest, mould or rotting wood that was difficult to uncover when he was viewing the house. Mr Salty didn’t need that much storage space in the kitchen anyways. So the new design actually let in more light and made the kitchen feel less stifling.
Speaking of undiscovered defects, the main door was something beyond Mr Salty’s expectations. It had looked fine when he visited the flat a few times before taking over. Unbeknownst to him, the door was already loose at the hinges. When it was fully opened, the far end of the door was actually resting on the floor. It slipped Mr Salty and his agent’s check. The door was always open and it didn’t occur to them to swing the door open and close for a test.
If Possible, Don’t Take A Loan
The rationale for going through the list above was simple – to really renovate what was required. This was because Mr Salty believed that if possible, we should not be taking a loan at all.
Renovation loans fall under what we called an unsecured loan. We have nothing to use as collaterals for the loan. Such loans are bad for our credit rating. It means it would make it difficult for us to get other loans in the future. Additionally, if you are a public servant, it is against the rules of some departments for their staff to take unsecured loans like a renovation loan. Therefore, Mr Salty believes that we should do our best to avoid taking renovation loans.
Decide How Much You Can Pay Per Month
In the event that we had so much to renovate, such that we have to take out a renovation loan, how do we know how much is enough?
When we talk about repaying loans, we have to consider the monthly payments we have to make for all the loans and monthly instalments we have committed. Some common repayments that Singaporeans incur are:
- Housing loan
- Car loan
- Student loan
- Monthly instalment (e.g. for a $10k HDTV)
The total of these monthly repayments should not exceed 30% of our monthly income. Therefore, those who have not incurred any loans before can afford to take a bigger renovation loan than someone who, let’s say, is already paying for a car.
One thing to note though, is that the interest rate and corresponding repayment amount depends a lot on the bank and the banker who processed the loan. Therefore, if possible, shop for different quotes to see if you can find one that offers you a repayment amount within your means, or one that has a good (albeit low) interest rate.
Prepare 1% Cash for Admin Fee
One thing Mr Salty can confirm though, based on his experience, is that be prepared to pay an Admin Fee in cash upfront. For his case, Mr Salty was asked to pay the bank in cash 1% of the loan amount.
Documents Required
To complete the renovation loan application, Mr Salty was asked to provide copies of the following documents.
- IC Scan
- Proof of ownership/Public Housing Withdrawal (Extract from CPF Statement > Property)
- Bank Application Form
For proof of ownership, the banker asked Mr Salty to go to his CPF account to print out the statement. After logging in, go to CPF Statement > Property and click Print to print that page out. That would state that CPF was deducted to pay for the property, which indirectly proved that the property belonged to Mr Salty.
Parting Words
The whole process of obtaining a renovation loan was not complicated. After all, bankers want to earn that commission, so they would facilitate the application as smoothly as possible.
The ball lies in our courts. We have to decide the scope of the renovation, which will affect the amount of loan we would need. Therefore, being very clear about what we want for the renovation is very important. Thereafter, all we need to remember is to set aside cash to pay for the admin fee after the renovation loan is processed.
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Remember, salty is life!