How to upgrade the energy efficiency of your home with an interest-free loan
An alternative solution for those who believe that it will not be feasible to finance the energy upgrade of their property through the "Ex Economo" programme will probably be offered from tomorrow. The application process is scheduled to start for the "upgrade my home" programme which offers interest-free loans of up to €25,000 for a term of up to seven years for the energy upgrade of a primary or secondary residence.
This programme may not offer subsidies but only "free money" but is expected to attract the interest of a large number of owners for the following reasons:
It does not have energy upgrade targets like the 'save' scheme. That is, there will be no need to involve an engineer and draw up a list of interventions to achieve a three-category upgrade. The owner chooses the work to be done and finances it with several interest-free instalments rather than having to provide their own capital.
The program has no income or age criteria and there is no question of "points" as with the "save" program. The predominant factor will be whether the applicant is deemed "eligible" for financing from the bank.
There is no restriction on the home being declared as the primary residence as is the case with the savings program. You can easily finance energy upgrades even in your holiday home.
The benefit of participating in the programme is not inconsiderable. If you go to a bank today to ask for a 25,000 euro loan to change windows and install a heat pump, they will tell you that the interest rate can be as high as 8.75%. These loans are often treated as "consumer loans" as no mortgage is registered on the property (so there are no mortgage fees etc.). A 25,000 euro loan with an interest rate of 8.75% (which eventually rises above 9% if the 0.6% contribution of Law 128/75 is taken into account) makes an instalment of 406.7 euro per month. With the programme you can reduce the instalment to EUR 297. So, the annual benefit is more than 1300 euros especially in the first years of repayment of the program and in total, the owner can save more than 9000 euros in 7 years.
The programme is expected to attract the interest of thousands of owners.
Will the loans granted through the "upgrade my home" programme be completely interest-free?
For the final recipient (i.e. the borrower), yes. The bank will charge interest on 25% of the loan (i.e. the remaining 75% will be interest-free) but this will be paid by the government. It is clear from the scheme that the borrower will be charged only for the fee. So, if the loan is EUR 20 000 and a repayment period of 50 instalments is set, each instalment will be EUR 400.
What are the main features of the loan granted under the "Upgrade my home" programme?
The purpose of the loan is to finance eligible costs for energy improvements to homes that legally exist.
They have a duration of three (3) to seven (7) years without a grace period.
They range from EUR 5 000 to EUR 25 000.
The Programme cannot be combined with other energy upgrade programmes financed with EU funds.
The loans are exempt from the levy of Law 128/75, in their entirety (i.e. the levy of 0,12 % for housing loans or 0,6 % for consumer loans)
They are amortised monthly.
Program loans may not be used to refinance an existing loan
What work can be financed through the Program?
Thermal insulation (internal/external),
Green roof construction,
Placement of Energy Frames-glass panels,
Placement of Solar Water Heater,
Installation of external permanent shading systems (not awnings),
Installation of a heating-cooling system, exclusively using a renewable energy source or a high-efficiency combined heat and power system (indicatively electric heat pump, inverter air conditioning units of energy class A+ and above),
Installation of thermostatic control systems,
Installation of energy storage system (batteries) from renewable energy sources.
Installation of photovoltaic stations - small wind turbines and other RES and
Installation works/Services of technical consultant-engineer.
An application for funding may relate to one or more of the above interventions. The interventions financed under the Programme in eligible dwellings must be implemented and the tax documents must have been issued at a time later than the date of inclusion in the Programme.
What do I need to provide to the bank to proceed with my loan?
The amount of the requested loan is determined on the basis of the submitted bids or work budget or preferences (materials, services, works included in the list of eligible interventions) from suppliers or contractors or technical consultants/engineers at the time of submitting the loan application. Physical tax information as well as supporting documents proving the legality of the property will be requested.
Is it a given that the bank will give me the amount I am requesting?
No. It is clear that the amount of the loan also depends on the assessment of the creditworthiness of the beneficiary carried out by the bank itself.
Will the Bank require collateral for the loan?
As security for the loan requirement, collateral or security participating in the Program will be obtained. Co-owners of eligible housing who do not participate in the Program may be contracted as collateral guarantors in the Final Recipient Loan Agreement. What do these mean? That a mortgage can be registered on the apartment and that someone can become a guarantor if they have a "share" in the property. There are costs involved in registering a mortgage and it remains to be seen how the banks will charge. However, reports indicate that banks will not ask for mortgages for this scheme. It will be seen in their official announcements of their programmes.
When will the money be given out?
The disbursement will be made in one lump sum or in instalments in accordance with normal banking practice for loans for similar purposes. It is likely that banks will ask for 'proof' of progress.
When will I be informed if I will be granted the loan or not?
Within thirty days from the date the applicant applies to the bank, the branch will verify that the eligibility criteria of the Scheme are met, assess the creditworthiness of the applicant and decide whether or not to issue the pre-approval of the loan and its terms and conditions.
If the bank considers that on the one hand the eligibility criteria of the programme are met and on the other hand the applicant is creditworthy based on the assessment of its creditworthiness, it will send the necessary information to the Development Bank (i.e. the entity running the programme). If the applicant does not receive pre-approval within the above 30-day period or if the application is rejected, the applicant may apply to another bank.
The Development Bank, after checking and confirming that:
a) the data registered by the Credit Institutions are in accordance with the characteristics of the programme,
(b) there are resources available in the Programme for lending,
(c) the applicant's TIN and the property have not been included in any other inclusion in the Program; and
d) the applicant has not become a beneficiary of any other Energy Upgrading Programme financed or still financed with EU funds as of 01.01.2020, commits the amount of the requested loan from the Programme budget, submits this application to the Programme and informs the Bank of the approval of the subordination.
The Bank shall inform the beneficiary of the inclusion of its application in the Programme and the procedure for concluding the Final Beneficiary Loan Agreement shall be initiated. The approval of inclusion is valid for a period of sixty (60) days from its notification to the applicant, within which the Final Recipient Loan Agreement must be concluded and until 30-06-2026.
Does it matter when the application is made?
Very much so. First of all there is a deadline which is 31/12/2025. Also, the approval process for all applications for inclusion in the programme is carried out on a first-come, first-served basis. Upon approval, a part of the programme's budget (€400 million) is committed. If the money runs out, then the application, even if approved, is put on a waiting list (in order of priority) so that it can only proceed if there is a decommitment and therefore a release of funds.
Is there any chance of losing the interest subsidy?
Upon completion of ninety (90) days of continuous default by the borrower, the interest rate subsidy is discontinued and the contractual interest as well as the default interest (on the total amount of the TAA loan) is charged to the Final Recipient. The date of termination of interest subsidy is defined as the completion of ninety (90) days of continuous default. The interest subsidy shall not be restarted even if the Final Recipient repays all of its outstanding debts or enters into a loan arrangement upon application to the bank.
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