So you’ve already used up the whole renovation loan, and the house is still not done. Now what? Well apart from sending angry Whatspp messages to the interior designer, and sharing your pain on Facebook for all to see, here are some concrete steps you can take.
These will save you having to live in a half-completed house, from lack of money.
1. Prioritise the Work That Can be Done
Some parts of the house will have to be left incomplete, if the cash has run out. In this situation, speak to the contractor about prioritising the work. Try to at least finish the essential living spaces.
Don’t make the living room a priority; it’s non-essential, and often the most expensive room. Instead, have the contractor work in the following order:
- Master bedroom
- Other bedrooms
- All other rooms, such as studies and dining rooms
Tell the contractor to leave out aesthetic work (i.e. decorations, such as wallpapering). Focus on functionality.
2. Consider Renting Out Unfurnished and Partially Complete
Once the bare essentials are in place (the property is liveable), you can rent it out as an unfurnished / partially finished unit. Leave it to your tenant to buy whatever tables, chairs, desks, etc. they need. You can then continue renovation works as rent money comes in, if your tenants don’t mind.
The downside is that you’ll probably have to offer a big discount, so your rental income may not be as high as you expect; but it sure beats leaving your property empty.
As another upside, tenants who are staying for a while (e.g. a family staying for a few years) are more likely to renew their lease with you, if they’ve bought all or most of their furnishings. This can help ensure a more stable cashflow in the interim.
And when they decide to leave, you can offer to buy over their furniture for cheap. This can save you a fair amount of money, as they’ll be eager to sell it off quickly.
3. Consider Leaving the Kitchen Incomplete for a Few Months
The kitchen is probably the most expensive room, next to the living room. The good news is, you can probably survive without one for quite a while.
Consider setting up a pantry spot (which need not be in the kitchen), as a makeshift measure. This is just a corner with a kettle, mini-fridge, microwave, and convection cooker. This is enough to make simple meal or prepare instant foods.
(Or there’s always relying on food delivery, and eating out at the hawker centre).
Save up for a few months, and you can complete the kitchen later in the year. While it’s not ideal over a long period, it might be better than taking up another loan. Which leads us to point out that you can…
4. Use a Low-interest Personal Instalment Loan to Make up the Difference
If you’re short by a few thousands, see if you can take a low-interest personal loan or a balance transfer to make up the difference. Whatever you do, don’t put the remaining amount on your credit cards, which carry high interest charges.
Interest rates on personal loans can go as low as 4.55% p.a. (EIR 8.5% p.a.), and make for good options if the amount you require is not too high. Another option you can try is a balance transfer, which offers you an interest-free period (typically 6 months) that keeps your EIR low.
But do be aware that once the interest-free period is over, whatever amount you still owe will be charged the prevailing interest rate (i.e., the same rates as the credit card your balance transfer was put on). As such, it is best to use a balance transfer only when you are sure of paying back the amount within the interest-free period.
5. Approach the Subcontractors Discreetly
Your General Contractor (GC) hires subcontractors, such as electricians and plumbers, to complete the renovations. Sometimes though, it pays to bypass them and discreetly speak to the subcontractors.
You may find that the plumber is willing to complete work in your toilet or kitchen, for a reasonable sum paid directly to them (as opposed to going through your contractor). You may find that, with the contractor out of the picture, some costs can fall dramatically.
However, be careful to only work with subcontractors who have proper insurance (if they cause any damage, it has to be claimed from their business insurance. Your home insurance will not pay out for it).
6. Try to Extend the Renovation Loan
Speak to your bank about the issues your’re facing, and see if they’re willing to stretch your renovation loan limit.
Some banks are willing to do this, if you’ve already been faithfully repaying the renovation loan as work progressed. Alternatively, they may just require you to find a guarantor – if you can find one, they might be willing to disburse a much bigger loan.
With the extra funds, you may then focus on finishing up your renovations.
7. Speak to Another Contractor
If your contractor is demanding a price that’s too high to finish the project, then look elsewhere. Sometimes, another up-and-coming contractor may be willing to finish up the work of the previous one, at a lower cost that you can cover with your available funds.
But be realistic. Know that at this point, you shan’t expect a masterpiece. Focus on getting a reasonable stopgap, until you can afford to pay for full completion of the works.
This article was first publised in SingSaver.