How Construction Loans Work In Singapore For Rebuilding Old Landed Homes (2025)
If you’re still deciding between buying a brand new landed home or taking on a rebuild, here’s something most people don’t talk about, the financing.
Everyone gets excited about the design, the pool… but no one talks about how construction loans can make or break the entire project and there are a few details you absolutely can’t afford to miss.
Imagine buying the perfect old landed at a fair price, only to find out halfway through the rebuild that you’ll need to top up cash and just like that, you are left scrambling to come up with hundreds of thousands of dollars they didn’t budget for.
The good news is that this is completely avoidable and before you call the architects and builders, let’s talk about how construction loans in Singapore actually work, how they’re different from other property loans, and why having a buffer is a pre requisite if you choose to rebuild.
Loan Options For Landed Homes In Singapore
Before we get into the weeds of construction loans, it’s worth taking a step back and looking at the three main ways you might be financing a landed home.
1. Buying BUC (Building Under Construction)
This is the most straightforward for financing, you agree on the price upfront, and you pay progressively as the developer finishes each stage. The loan amount is based on that agreed purchase price, and there’s no surprise “future valuation” to worry about.
2. Buying Completed
Same idea, but you pay everything in one go. You take a housing loan on the agreed purchase price, and once you get the keys, you’re done. Easy.
3. Buying Old and Rebuilding (Construction Loan)
This is where things get tricky. A construction loan isn’t just one big lump sum. It’s two loans in one — the housing loan for the land purchase, and the construction loan for the rebuild. And here’s the part that catches people off guard:
The total you can borrow is up to 75% of the bank’s valuation when the rebuild is completed — not 75% of your costs.
That 75% has to cover both the land and the rebuild combined.
And the construction loan is disbursed in stages, not all upfront.
It’s the most flexible route in terms of getting exactly the house you want, but also the one with the most moving parts. And if you’re not careful, those moving parts can cost you a lot more cash than you planned.
Why 75% LTV Is Misleading
One of the biggest misunderstandings I see with buyers is this:
““The bank will lend me up to 75%, so I should be fine covering my rebuild cost.””
That’s not how it works.
With a regular home loan, whether you’re buying a completed property or a BUC, the 75% LTV is calculated based on your agreed purchase price (or the bank’s valuation, whichever is lower). You know that number on day one, and it’s fixed.
With a construction loan, 75% is based on the bank’s own valuation of your completed home, inclusive of the land and the rebuild. It’s not 75% on the land and another 75% on the build. It’s one pot, and you’re drawing from it twice.
Here’s how the math can play out:
If you buy 2,800 sqft at $1,700 psf = $4.76M purchase price.
At 75% LTV on purchase price, the land loan works out to $3.57M.
| Scenario | Bank’s Future Value | 75% Loan Ceiling | Housing Loan Already Taken (Land) | Left for Rebuild | Cash Top‑Up Needed |
|---|---|---|---|---|---|
| Optimistic | $8.50M | $6.375M | $3.57M | $2.805M | $445K |
| Conservative | $7.50M | $5.625M | $3.57M | $2.055M | $1.195M |
Note: 75% LTV is applied to the bank’s future value of the completed home (inclusive of land + rebuild). Land loan is deducted first; the remainder is available for construction. Any shortfall requires a cash top‑up.
So even if your build is budgeted at $3.25M, you can see how a slightly lower valuation can leave you scrambling for hundreds of thousands in cash top-ups and that’s assuming your TDSR even allows you to borrow the maximum available.
The key takeaway: with a regular home loan, you know your borrowing cap upfront. With a construction loan, you don’t and that uncertainty is why rebuilds almost always need a healthy cash buffer.
Why Strong Income Doesn’t Always Mean Bigger Loans
You might have the income and you might even have the assets. But if your TDSR (Total Debt Servicing Ratio) is maxed out, the bank doesn’t care and they’ll simply cap your loan.
Quick refresher:
TDSR limits your total monthly debt obligations to 55% of your gross monthly income. That includes:
Housing loans (both land and rebuild portions)
Car loans
Credit card instalments
Personal loans
Any other fixed monthly commitments
When you’re financing both the land purchase and the rebuild, the repayments from both will be factored into your TDSR calculation. If your existing commitments already take up a large chunk of that 55%, you may find you can’t borrow as much as you thought.
And unlike LTV, where you can sometimes bridge the gap with a cash top-up, there’s no workaround for TDSR. If you exceed the limit, the bank simply won’t approve a higher loan.
The takeaway: Check your TDSR headroom early, before you commit to a purchase or start planning your rebuild budget.
Interest Rate Reality Check
When most buyers compare the cost of rebuilding versus buying brand new, they tend to focus on the headline numbers , land cost, construction cost etc. What often gets left out is the cost of financing the rebuild itself.
Construction loans are typically more expensive than standard housing loans. As of writing, most are pegged at 3-month SORA + 2%, which works out to roughly 4.3% p.a.
A few things to keep in mind:
Construction loans are floating only
Shorter timeline means you’re paying a higher rate on an increasing balance over 12–24 months.
If SORA climbs during your build, your monthly interest cost rises with it.
Here’s a quick illustration:
On a $2.8M construction loan balance, a 1% jump in rates = about $28,000 extra interest per year.
That’s before factoring in any delays that stretch the build timeline and extend your interest payments.
It’s not just about whether you can finance your rebuild. It’s about whether you can stomach the interest swings while juggling a project with dozens of other moving parts.
Why You Still Need A Cash Buffer
Even if rates don’t move much, you’ll want a 20–30% cash buffer on top of your estimated build cost. That’s because interest hikes are only one way a rebuild can blow past budget. Other common triggers include:
Lower-than-expected bank valuation
TDSR limits capping your loan amount
Material and labour cost overruns
Design changes along the way
Build delays (which also extend interest payments)
Run too close to the wire, and one surprise can leave you scrambling for funds or worse, force you to halt the project. The safest rebuilds are the ones where the owner has more cash than they think they need, and never has to use it.
Ask These Questions Before You Commit
By now, you’ve seen how easy it is for a rebuild budget to shift — between bank valuations, TDSR limits, interest rates, and the need for a cash buffer. So before you sign on the dotted line for that “perfect” old landed home, run yourself through these three filters:
1. What’s the bank’s realistic future value for my plot + build?
Don’t rely on your own spreadsheet or what your architect says it might be worth. The bank’s future value is the number that drives your maximum loan amount. Even a $1M gap between your expectation and their valuation can mean a six-figure cash top-up.
2. Do I have TDSR headroom for both land and rebuild?
You might have the income, but if your existing debt pushes your TDSR near 55%, the bank will cap your loan no matter how much you can “afford” in your head. Get this checked before you commit to the land purchase.
3. Is my cash buffer at least 20–30% of my build cost?
A healthy buffer isn’t just for rate hikes — it’s your safety net for valuation drops, cost overruns, and delays. The more complex the build, the more you should err on the higher side of that range.
