Private Housing

Home Improvement Loan: Guidance Information

Introduction

Due to reduced funding provided by Welsh Government in recent years, the availability of funding for housing grants has significantly reduced and ended in most circumstances. So to make the most of available funding and help the continued improvement of housing stock within Pembrokeshire, a more sustainable and effective use of scarce resources is needed.

Home Improvement Loans will enable funding to be recycled and help improve housing standards across the County. 

What are Home Improvement Loans?

Home Improvement Loans are loans being made available through Local Authorities in Wales to enable the renovation and improvement of single or multiple properties in order to improve or maintain the standards within the property which ensure its continuing use as residential accommodation.

Works undertaken with loan funding must contribute to making the property warm, safe or secure. There is no requirement that the property must meet all of these criteria as the loan could be targeted at one key element.

Who can apply for a loan?

Owners of sub-standard accommodation within the County can apply for the loan. Empty dwellings are not applicable, unless the owner is intending to reside in the property as their main dwelling. This includes:

• Owner occupiers
• Landlords
• Developers
• Charities / Third Sector

Priority is given to homeowners and landlords. Priority must be given to landlords that offer affordable / social housing / nomination rights over landlords offering market rented properties.

If a property is under joint ownership both parties will have to agree to a legal charge being placed on the property including signing the legal charge and loan facility agreement documentation; however only one person will be required to complete the application form.

Does the property have to be an existing dwelling to be eligible for a loan?

No.

We will consider applications for loans to convert empty commercial properties into residential accommodation. However, only owners looking to reside in the property on a full time basis will be eligible to apply for the Home Improvement Loan in these circumstances. 

Landlords looking to rent out the property will need to refer to our Houses into Homes Empty Property Loan.

It is very likely that you will need planning permission for the conversion and so you are strongly urged to contact the local planning department to discuss your proposals. We will only consider a loan application if the relevant planning permission has been granted. 

What is the maximum amount of loan I can apply for?

Loan applications can be made for between £1000 and £25,000 per habitable unit, up to a maximum of £150,000 at any one time. If you are applying for a loan for a building with two units (flats) the maximum loan you can apply for is £50,000. If you are applying for a loan for a property with six or more units (flats) the maximum amount of loan would be £150,000. 

The actual amount of loan that will be approved will be dependant on the actual cost of the works, e.g. if the works are calculated to cost £10,000 this is the most the loan will be approved for.

Please note that any loan offered, taking into account any existing mortgage, cannot exceed 80% of the current property value. Therefore, if you have an existing mortgage of £76,000 on a property with a current market value of £120,000, then the maximum loan that can be approved is £20,000:

Current Value          £120,000

Mortgage & Loan     £  76,000 + £20,000 = £96,000 (Maximum 80% Loan to value)

If there is an existing mortgage the current property value will be determined and supported by a valuation report. The valuation must be undertaken by a qualified surveyor or member of the Royal Institute of Chartered Surveyors (RICS) and should confirm current market value, potential value (on completion of project) and rental income (if loan to let).

The cost of the valuation is payable by the applicant. 

Will my finances be taken into account?

Yes.

The applicant will be subject to a test of affordability in order to ensure that the repayments of the loan can be met. The affordability test will form part of the application process and is carried out by a third party (West Wales Credit Union Ltd). Minimum repayment amounts are set at £50/month for owner/ occupiers and £100/ month for landlords. 

The duration (payback period) of the loan is subject to agreement between all parties and we will therefore try to work with you in determining a suitable repayment schedule prior to agreeing the loan. The maximum period for repayment for owner occupiers is 10 years, and the maximum period for repayment for landlords is 5 years.

Applicants must not:

• Have adverse credit history which may include:
• County Court Judgements (CCJ)
• Individual Voluntary Arrangements (IVAs)
• Debt Relief Order (DRO)
• Bankruptcy (within last 6 years)
• Company Insolvency / Liquidation
•  Owe any outstanding debt to Pembrokeshire County Council at the time of making an application

 What do I have to do with the property or units after completion of the works?

After completion of the works the property must continue to be used as a dwelling, whether by owner/ occupation or rented to tenants. There are no restrictions on the type of tenancy issued (eg affordable rent) however priority for loans will be given to landlords who can offer the property as affordable housing, social housing or give the Council nomination rights.

Do the works/conversion have to be carried out to any sort of standards?

Yes.

All work must be carried out in accordance with any planning permissions or building regulation approvals made in respect of the property. Additionally the property/units must not contain any Category 1 hazards (high risk) upon completion of the work. The Local Authority will work with you to ensure all relevant items are covered.

Are the loans secured loans?

Yes.

Loans must be secured by a first or second financial charge with Land Registry. If there is an existing mortgage on the property we will need the lenders consent to secure our charge.

Securing the Loans gives us the necessary powers under the Law of Property Act 1925 to recover any debts by means of sale of the property. 

What is the interest rate and arrangement fee for the loan?

The loans are interest free, providing there is no default on the loan. In the event of a default in repayment the remainder of the loan will become immediately due and interest will be charged at a rate of 5.5% above Bank of England Base Rate, as set out in your loan agreement document.

There is a one off arrangement fee associated with the provision of the loan. The fee amount is set out as follows;

For loans taken over 1 to 3 years, the administration fee will be 10%

For loans taken over 4 to 10 years, the fee will be 15%

Am I able to get any assistance with arranging the work?

We are unable to provide direct assistance however to aid you in locating contractors to provide you with quotations for the proposed work Pembrokeshire County Council have included a list of contractors who completed works within the last financial year and have expressed an interest in providing competitive quotations.

Please note that this is not an approved list but merely a reference aid to enable applicants to submit an application and that applicants remain free to choose to obtain quotations independently and are not restricted to those listed.

When will I have to repay the loan?

You will be required to begin repaying the loan in the first full month after works are deemed complete and final payment of the loan has been made. You will need to complete a Direct Debit form as part of the application to ensure repayment progresses smoothly.

The term of the loan will be discussed with you at the outset of the agreement and will need to take into account a minimum payment each month. Owner occupiers will be able to repay the amount over a period of up to 10 years and will need to meet a minimum monthly repayment of £50/month. Landlords will be able to repay the amount over a period of up to 5 years and will need to meet a minimum monthly repayment of £100/month.

The loan can be repaid in full at any time.

If you miss a monthly payment (loan default) the full amount will become due and interest will be charged on the remainder, at a rate of 5.5% above Bank of England Base Rate, in accordance with your loan agreement.

Are there any conditions attached to approving the loan?

Yes: -

• The works should be completed within 12 months of the approval, unless otherwise authorised.
• Payments will be made retrospectively, upon Invoice, and after inspection of the works.  Interim payments may be made, under the current Interim Payment Policy operated by the Private Sector Housing Team.
• Full repayment of funding given through this scheme will be required in the event of transfer of the title of the property or sale of the property.
• Loans amounts and repayment schedules will be determined by the Local Authority and are subject to minimum repayment amounts. (£50/ month for owner occupiers and £100/ month for landlords.)
• The applicant must agree to make the monthly repayments via Direct Debit.
• For all loans a Land Registry Legal Charge will be lodged that will bind the applicant and any successors in title.
• Repayments will begin from the first full month after final payment is made; date to be determined by the Local Authority.
• In the event of a default in loan repayment, the full remaining loan sum will become due, and interest will be bearable as set out in the Loan Agreement document.

What do I need to provide as a completed application? 

An application for loan assistance should be made on the forms provided through the Home Improvement Loan Scheme. An application form will be provided on completion of the expression of interest form and further copies can be made available on request. A complete application should include the following: -

•  A completed application form.
• Confirmation of ownership of the property. This should normally be an “office copy” and Title Plan provided by the Local Land Registry Office, www.landregistry.gov.uk
• Two itemised estimates and cost of any associated fees e.g. structural engineer’s fees, or project management fees. In exceptional circumstances, the Council may be able to accept a single estimate, where it is appropriate to do so.
• Supporting documentation for ID purposes
• Valuation Report (undertaken by a qualified surveyor or member of the Royal Institute of Chartered Surveyors - RICS).  In cases, where the property is un-mortgaged and there is clear evidence to support the view that the property provides adequate and suitable security for the loan, a valuation report will not be required.
• Specialist reports, Building Regulations, Planning Permission and plans where required.
• Any other details notified to the applicant before a decision is made as to whether to make the applicant a loan offer.
• Consent from first lender, where required.

Please note that the financial eligibility application form from the West Wales Credit Union may require additional information and any queries regarding it should be directed towards them.

I am interested in applying for a loan, what do I do next?

Please contact Philip Jackson for a brief discussion and to arrange a visit to your property where the eligible works can be determined.

Tel: 01437 775635

e-mail: Philip.jackson@pembrokeshire.gov.uk

Write: Private Sector Housing Team, Pembrokeshire County Council, 1i North Wing, County Hall, Haverfordwest, Pembrokeshire, SA61 1TP