HEEPS EQUITY LOAN 5th May 2017 Neil Leckie Care & Repair Conference

Summary The HEEPS: Equity Loan is a pilot scheme funded by the Scottish Government which aims to help homeowners improve the energy efficiency of their property and carry out essential repairs. Launched January 2017 The scheme allows individuals to obtain a loan which will be secured against their property. There are no monthly repayments. Open to homeowners with properties in the Argyll & Bute, Glasgow City and Perth & Kinross local authority areas. Energy Saving Trust have teamed up with the Care and Repair to deliver the scheme on behalf of the Scottish Government.

Background – Purpose of Scheme Cover any gaps in funding Help for private owners in mixed tenure blocks Improve housing stock Save carbon and energy Make energy efficiency and repairs more accessible No upfront costs – any fees can be added to loan No monthly repayments – repaid when sold or applicant dies No credit check required Allow individuals to keep their home “Asset rich, cash poor” Create a habitable living space – improved quality of life

What is an equity loan? An equity loan allows homeowners to borrow money which is secured against their property The amount borrowed is translated into a percentage equity stake of the total value of the property (for example, borrowing £10k on a property valued at £100k will mean the owner giving up a 10% stake) Unlike other loans there are no upfront costs or ongoing repayments

Who can apply? The scheme is open to owner-occupiers and private landlords with a property in one of the three pilot areas Property should be in council tax band A-C If the property is in band D or above a permanent occupier needs to be in receipt of certain qualifying benefits (see website) Landlords must be a natural person with no more than 2 properties to rent

Key Conditions of the Scheme Maximum loan value is £40,000 but cannot be more than 50% of the property’s estimated market value Applicants must have sufficient equity in their property, and must retain at least 30% equity after the loan is taken out All successful loans will be subject to an administrative fee of £671. Further fees may apply but can be added to the loan At least 55% of the loan amount must be towards energy efficiency work (see next slide)

Examples of improvements covered Energy Efficiency (>55%) Repairs (<45%) Central Heating Systems Repairs to roof structure Insulation (loft, walls, floor) Rainwater goods Renewable Technologies Damp prevention Glazing (double, secondary) External wall repairs Low energy lighting Ventilation systems Draught Proofing Chimney stacks Any repair that reduces heat loss through the building fabric and/or reduces damp or moisture penetration could be classed as energy efficiency work

How much is repaid? The amount repaid is based on the equity stake held by the Scottish Government. However, a cap is set at 2.5% APR to protect homeowners from sharp increases in property prices The amount repaid will be the lesser of: The Scottish Government’s agreed equity share of the property’s sale price The loan amount if it had been a commercial loan at 2.5% APR for the duration of the agreement

Repayment Example – above cap You borrow £10,000 against your property’s estimated value of £100,000 This means the Scottish Government have a 10% stake in your property If you sell your property in 5 years for £120,000, the 10% equity stake would now be worth £12,000 A commercial loan of £10,000 taken out at 2.5% APR payable over 5 years would result in an overall payback of £10,648 The lesser of the two figures is to be paid back, so you would repay £10,648

Repayment Example – below cap Taking the previous example, you borrow £10,000 against your property’s estimated value of £100,000 This means the Scottish Government have a 10% stake in your property If you sell your property in 5 years for £105,000, the 10% equity stake would now be worth £10,500 A commercial loan of £10,000 taken out at 2.5% APR payable over 5 years would result in an overall payback of £10,648 As this is below the level set by the cap, you will simply pay back 10% of the sale price, or £10,500

Benefits over other equity schemes Backed by reputable organisations Scottish Government Energy Saving Trust Care and Repair Impartial advice and assistance throughout the process Rules in place to protect applicants Must maintain 30% equity after loan Cap in place to protect against property price hikes – will not need to pay back significantly more than borrowed

Going Forward Working to make the scheme a success Help to spread the word More information: www.energysavingtrust.org.uk My contact details: Email: neil.leckie@est.org.uk Phone: 0131 555 7898