BT Money Hacks: Renovation loans - Maximise savings and minimise stress
In the latest episode of Money Hacks, by The Business Times, host Howie Lim delves into the financial intricacies of home renovations with expert guest Jenn Ong, managing director of GXS Bank. As renovations continue to be a major financial undertaking for many homeowners, this episode offers invaluable insights on making smart financial decisions to avoid common pitfalls.
Home renovations - exciting or overwhelming
With numerous design choices and various fixtures, it's easy to get carried away. However, Ong emphasises the importance of understanding the financial implications before diving into any renovation project.
Lim leads the discussion to the critical first step - determining your budget and knowing where to get the necessary financing. Ong highlights that while cash is often seen as the best payment method, it is not always feasible for everyone, especially when renovation costs can run into the tens of thousands. She points out that renovation loans can be a smart alternative, provided they're competitively priced and offer the needed flexibility.
Setting realistic budgets
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Another key takeaway from the episode is the importance of setting realistic budgets. Lim probes the common recommendations that suggest not spending more than 10 per cent of your property's value or six times your monthly income on renovations.
Ong however suggests that these are merely broad guidelines and that one's disposable income should ultimately dictate the budget. She stresses the significance of remaining financially comfortable, even if it means compromising on certain renovation elements.
Good debt vs. bad debt
The duo also addresses the often-asked question of whether renovation loans are considered good debt. Jenn clarifies that while housing debt is generally seen as good debt because it's secured against a valuable asset, renovation loans are still unsecured and should be approached with caution.
The focus, she insists, should be on making your home a place you love, rather than attempting to increase its market value through extravagant renovations.
Flexibility in loan repayments
Flexibility stands out as a significant advantage when choosing a renovation loan. Ong explains that the ideal renovation loan should allow for flexible repayments without penalties, making it easier to manage your cash flow. Here she also expands on the kinds of loans she prefers and is a must listen section of the podcast.
The conversation takes a critical look at the various fees and charges that come with renovation loans with Ong warning listeners to be vigilant about these additional costs.
Listen now for top tips managing financial stress during renovations and how to prioritise necessary fixes over aesthetic changes.
Lim wraps up the podcast by echoing Ong's advice, reminding listeners that while offers and rewards tied to renovation loans can be tempting, it's crucial to do the math and consider the overall financial impact.
Howie Lim will have more great advice and hacks in our next episode of Money Hacks next week. We welcome your feedback or episode ideas to btpodcasts@sph.com.sg.
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Written and hosted by: Howie Lim (howielim@sph.com.sg)
With Jenn Ong, managing director, GXS Bank
Edited by: Howie Lim & Claressa Monteiro
Produced by: Howie Lim & Chai Pei Chieh
A podcast by BT Podcasts, The Business Times, SPH Media
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Citing a McKinsey report, she noted that some US$5.8 trillion in assets will be transferred across generations in Asia-Pacific between 2023 and 2030 by wealthy families, and that many family offices report that preparing the next generation to take on wealth responsibly is a major challenge.
