The HEEPS Equity Loan Scheme

If you live in specific areas of Scotland, you may be able to take advantage of the new Home Energy Efficiency Programme Scotland (HEEPS) Equity Loan Pilot Scheme which is being tested by the Scottish Government. These loans do not require monthly repayments so will be good for people on low incomes who are faced with large repair bills.

Who can apply?

You can only apply for this loan if the property in question is in one of the following Council areas:

  • Glasgow City
  • Argyll and Bute
  • Perth and Kinross
  • Inverclyde
  • Renfrewshire
  • Dundee
  • Stirling

In addition,

  • the property must be in Council Tax bands A-C or
  • you,or someone who lives in the property must be in receipt of a qualifying benefit
  • if you are a private landlord, the property must be in Council Tax band A-C and you can only have with a maximum of two properties for rent

What work will this equity loan help with?

While this is an energy efficiency loan, it is now recognised that, as a damp home is a cold home, energy efficiency work can also include essential repairs.

The work you are carrying out to your flat must include an element of energy efficiency work but external repairs are also included.

Specifically:

  • 55% or more of the cost of the work must be energy efficiency related. You can also include works which reduce heat loss in this 55%. So external repair work which reduces damp and draughts - such as fixing a leaking roof, repairing damp walls or repairing draughty windows - would qualify. Any energy efficiency measure you want to get funded must be recommended in the property’s Energy Performance Certificate or in an energy report supplied by Home Energy Scotland.  You may need to commission such a report.
  • 45% or less of the works cost can be used to fund general repairs to improve the property's condition

How does an equity loan work?

An equity loan is like a second mortgage but without any ongoing payments. It is repaid when the house is sold.  The amount you pay is related to how much you have borrowed and how much your house has increased in value.

In the case of this pilot scheme, the amount you get will depend, largely, on the amount of loan you owe on your flat. The maximum loan is £40,000 or 50% of your property's estimated value. You must also retain a minimum of 30% of the estimated value of the property.

There will be an administration fee of £671 but you will only pay this if you are successful with your application.

The following examples show how the scheme will work.

Borrowing example 1

  • the value of your flat is assessed to be £100,000
  • the current value of your mortgage is £50,000 – 50% of the value
  • an allowance of 30% of the value of the flat is always protected (in this example £30,000)
  • you will be eligible for an equity loan which is equivalent to the remaining amount – in this case 20% or £20,000

Borrowing example 2

  • the value of your flat is assessed to be £100,000
  • the current value of your mortgage is £10,000 – 10% of the value
  • an allowance of 30% of the value of the flat is always protected (£30,000 in this example)
  • the amount of capital on which the loan will be based is 60% (£60,000) but you will still only be able to get the maximum loan of £40,000 (40%)

Repaying the loan

When you sell your flat, you will repay a percentage of the property value equivalent to what you have borrowed. 

Repayment example 1

  • you borrowed 20% of the flat’s assessed value of £100,000
  • you subsequently sell your flat for £110,000
  • the amount you repay is £110,000 x 20% (£22,000)

Repayment example 2

  • you borrowed 20% of the flat’s assessed value of £100,000
  • you sell your flat for £95,000
  • the amount you repay is £95,000 x 20% (£19,000)

However, if your house has increased considerably in value, there will be a cap on what you repay. This means that you will never repay more than you would have paid if you had taken out a loan at an interest rate of 2.5% APR.

Repayment example 3

  • you borrow £10,000 of the flat’s assessed value of £100,000 - a 10% equity stake
  • you sell your flat 5 years later for £120,000
  • the amount you would repay is £120,000 x 10% (£12,000)
  • but commercial loan of £10,000 at 2.5% APR over 5 years would only have cost you £10,648
  • the capped amount would repay is £10,648, not £12,000

Applying for an equity loan

The loan scheme is being run by the Energy Saving Trust and the pilot scheme is in operation until the 31st March 2018 while the Scottish Government and the Energy Savings Trust get an idea of how many people are interested in this kind of financing for repairs. If you think a scheme of this type might be of use to you, we recommend that you contact Home Energy Scotland even if you think your situation doesn't quite meet all the criteria as there may be other forms of assistance available.

Next steps

Find out more from the Energy Savings Trust Scotland  who are running the HEEPS Equity Loan Scheme.

Contact Home Energy Scotland on 0808 808 2282