How to plan your home renovation budget

Just got the keys to your new BTO house or the resale flat and want to dive into renovations?

Or have you simply grown sick and tired of the design and structure of your house and want to switch it up?

Then yes, it is time to renovate your home.

Before diving into renovations, there’s a protocol that you can follow to plan your home renovation budget.

Home renovation loan or personal loan?

When it comes to renovating your home, you should always take out a home renovation loan instead of a personal loan.

The interest rate and loan tenure range for a home renovation loan range from 2.88 per cent to 5.8 per cent, with a loan tenure of up to five years. Personal loans are higher, at around six to nine per cent per annum.

A maximum loan amount is capped at $30,000, or six times your monthly salary (whichever is lower). Moreover, you need to have a minimum income of about $24,000 to $30,000 per year.

Do check with your banks on what you can use the home renovation for before taking one, especially different banks have different offers and promotional rates periodically.

There are generally two types of loans available:

Monthly rest calculation: The interest is charged only on the outstanding amount. The quicker you pay down the loan, you less interest you pay over time.

Flat rate: The interest is based on the entire principal amount.

Aside from the interest rate, make sure to ask if the banks charge a processing fee. It usually ranges from one per cent to 1.5 per cent of the approved loan amount.

What can you use your home renovation loan for?

With a home renovation loan, the bank isn’t just going to hand over the money for you to use on anything and everything.

What you can use your loan for:	What you can’t use your loan for:
Electrical and wiring works	Furnishings
Flooring and tiling	Air-conditionings
Basic bathroom fittings	Curtains and bedsheets
Built-in cabinets	Smart home devices
Painting works	Artwork
Structural alterations	Home entertainment system
External works within the compound of the house	Electrical and household appliances

So if you’re looking at jazzing up your home with that new state-of-the-art, voice activated smart home system, you’re going to have to pay out of pocket for it. Sorry to burst your bubble.

Plan your home renovation budget

• Set aside cash
• Prioritise your needs and wants
• Research and compare prices
• Estimate your costs
• DIY with recycled and refurbished items

1. Set aside cash

Whatever budget the interior designer gives you, set aside about 20 per cent more to give yourself some wiggle room for unforeseen costs.

You can’t expect everything to be smooth-sailing and executed as planned. For example, you may have last-minute issues, such as having to change your tiles because a supplier can’t deliver. Work that goes on for longer than the allotted period of time will also incur more labour costs.

Besides preparing for the unexpected, you may want to save as much as possible in cash, besides relying on the loan. The less you need to borrow, the less interest you’ll have to repay.

2. Prioritise your needs and wants

You may have an endless list of home renovations, but you cannot have it all. Come out with a list and sort them into needs and wants.

It may be tough but rank them accordingly. For example, energy-saving lightbulbs are definitely more useful, and cost-saving as compared to a disco ball or chandelier. If you’re on a tight budget, you need to forgo wants such as fancy bathtubs.

After sorting, reassess your needs again with a fresh perspective. Those that you think are not as urgent can be put on hold first. For example, renovating your worn-out bathrooms is actually more important than replacing your floor tiles, assuming the latter are working fine.

Also, your vision and priority may change in the future, hence putting less urgent renovations on hold first is a good idea.

3. Research and compare prices

With more interior designer firms going online (and the rise of comparison platforms), you can easily find the most competitive rates.

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In addition, look through the comment and review section as well as reviews to get a rough idea of the services and quality of each renovation firm. Moreover, you have to know the pros and cons of the items that you are considering on purchased so as to make informed decisions.

Choose renovation firms and professionals that are aligned with your vision and within your budget. For example, your interior designer has to be on the same page as you and at the same time, give you valuable insights and suggestions.

There’s the saying, “Buy cheap, buy twice.” Don’t choose cheap labour just to scrimp and save some money. It may backfire, causing you to spend more to repair subpar work. Ask around your friends and family who have had experience with home renovations and collect some referrals to help in your decision-making process.

Besides comparing prices for design firms, do compare loan interest rates as well. Pick the cheapest among renovation loans.

4. Estimate your costs

After diligently Googling and researching potential renovation firms, professionals and items, collate them into an excel spreadsheet right off the bat. It’s easier to store and track your expenditure if you do it on Excel thanks to its functions such as tables and tools for easier calculations.

If you’re unable to find prices online, give the companies and professionals a call. Try to squeeze your estimated cost to preferably 10 – 20 per cent below your budget. This prevents overspills or miscalculations.

5. DIY with recycled and refurbished items

Recycling items and materials that are still in good condition by giving it a fresh coat of paint or new bolts and screws. They can provide a brand-new look to your home without burning a hole in your pocket.

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For example, you can sand and paint wooden fruit or wine boxes and drills them onto your walls to use as bookshelves.

Not into the DIY life? You can sell your used objects and materials to second-hand stores, the rag-and-bone man or on websites such as Carousell to get back some cash. Then, you can use this cash to fund your new items and renovations.

Buying recycled or used items whenever possible helps you not just save money, but also cuts down on unnecessary consumerism. As long as the items are durable and in decent condition, it is worth the price.

Hiring professionals to do tasks such as painting will set you back a few hundred dollars. Why not save that money by doing it on your own? Sweat it out with your family members and foster closer bonds while doing something collectively.

With all these being said, the most important part is still checking how much cash you have and whether you need to get a home renovation loan. Moreover, plan your budget comprehensively to avoid re-renovations, which may actually cost you a bomb.

This article was first published in 99.co.