HOUSING MATTERS
Key Things You Should Rethink Before Renovating Your First Home
It is an exciting period for you. You just got the keys to your home and you cannot wait to alter the property to your liking. But to most people, deciding on what you like would not be the biggest problem. One big issue might be on how to finance it.
Thus, this article will focus on what you should reconsider prior to signing an agreement with your Interior Designer or Contractor.
Will you stay at the home forever or planning to sell it?
It is normal that sometimes we give in to our wants way too many times. But with a thing that will cost you a 5-digit figure, you do not want to make a mistake over it.
As humans, we would always want to look forward to what is next in life, and when it come to our own home, we would want an upgrade. Maybe you have a 4-Room flat now and you would want to move to an Executive Condominium (EC) in the future.
You would need to sell off your 4-Room flat first prior to buying the EC.
Say for example when you first bought your 4-Room, you did an extensive renovation for your flat. Thinking that due to the extensive renovations made, you are able to sell it at a high price. However, that is not totally true. Sometimes you can incur a loss if you factor in the renovation cost.
Furthermore, your own taste might not be the same with everyone else. It could totally backfire.
Thus, if you do intend to sell off your flat in the future, be more particular on your renovation plans. We are not professional in renovations but maybe go for something subtler. And always look at the cost as that might factor in on your profit/loss column.
On the other hand, if you do really want to stay there throughout your lifetime, you can feel free with your renovation plans. Nonetheless, spend within your means.
READ ALSO: Finding Out Who Owns The HDB Flat When You Passed On
Stagger your renovation
If you will be staying for several decades at your flat, do you really need to renovate your entire flat on year 1?
It is understandable that you might be in the first few years of your career and cash flow is not that strong. Thus, you might want to do the necessary only for your home. With the budget you are willing to put aside, you would know the limit of your renovation.
Even if you do have the budget, you would not want to put all of your savings all in one “basket”. You might want to use it for your other financial goals, stock up your emergency fund or even preparation to have your first child.
Down the road, when you have more money and savings, you can perhaps do “Phase 2” of your renovation plans.
Like mentioned above, everyone is looking forward to what is next in life, thus “Phase 2” can be part of your plans.
READ ALSO: 8 Things To Be Aware Of When Upgrading Your Property
Taking the Renovation loan
Imagine this, you love the proposed plan from your ID and you know that would need to take a loan to finance the renovation. We all know how a loan works. We get money from the banks that we need and in return, we pay the bank an interest on the amount loan.
Hence, here are something that may save you some bucks.
- Search for the lowest prepayment fees
Say for example after a few years of paying back your loan and you suddenly received a lump sum of money. You then decided to pay off your remaining loan.
The bank will then charge you a Prepayment Fee. Why?
It is all business. If you are paying off the loan earlier, you will somehow break the promise of five years. Thus for breaking the promise, you would need to be penalized.
Thus, when searching for a Renovation loan, you might want to search for the lowest prepayment fees. That will save you some bucks when you decide to clear the loan earlier.
- Minimise the loan amount
You got the quotations for the loan and you are eager to get the renovations going. You took a loan and end of you are happy.
But what if you have waited and save more money. You could perhaps save more in the future, as you would be paying lesser interest.
Here is a comparison:
- The 5-year commitment
The maximum tenure for taking a renovation loan is five years. And if you decide that loan tenure that will equally mean that you have a commitment to pay off your liabilities within that amount of time.
Amongst the several things in your monthly expenses, there some that you are variable. Which means that you can control the amount you put into that particular expenses. Some example would be foods, transportation, entertainment or even your electricity bills.
On the other hand, there are also fixed expenses. Insurance premiums, mortgage payments or maybe your child’s school fees.
Coming back to the renovation loan, that will be under fixed expense.
When the time of crisis arrives, you can only alter your variable expenses and unfortunately, you cannot change your fixed expenses.
Even if you can alter the variable expenses, you can simply not eat for the whole month. There is a limit to what you can alter to. After you reached the maximum when altering the variable expenses, you may need to reconsider your fixed expenses.
You cannot stop paying your mortgage; you will lose your home. And you cannot stop paying your child’s school fees; you know that education is still very important.
You can perhaps stop paying the renovation loan and that will result in a default. If you are not able to pay a debt that you borrowed from a financial institution or bank that amounts more than $15,000, you might have to declare for bankruptcy.
That is a place that no one would want to land.
Thus, when signing on for the loan, just remember the amount of commitment that you are getting into.
READ ALSO: Minimum Occupancy Period (MOP): Why Is It 5 Years?
Be excited and careful at the same time
It is the first time that you have your own set of keys to your own home. You have every right to feel positive about it.
Nonetheless, do not give in to your wants and accidentally fall into hot waters.
You will not be staying there for only a month, you will be staying there for years to come.
Enjoy the journey and do not stress out on paying loans all the time. Understand yourself and plan ahead.
That is the end of the article and hope the information is useful. Do share it with your friends and families. Till next time.
Disclaimer
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
