Reducing your energy consumption at home can help you in many ways. It can reduce your carbon footprint – helping you play your part in ensuring a cleaner and greener environment for future generations. But did you know that you can also save money if you plan to buy or build an energy-efficient house by applying for a green home loan.
What is a green home loan?
A green home loan is a financial product that rewards you for saving energy at home. Just like a regular home loan, you can use a green home loan to borrow money to purchase a house. But the property you wish to purchase must meet some minimum sustainability standards, which could differ between lenders. You can also take out a green home loan to build an energy-efficient home or improve the sustainability standard of your current home.
An energy-efficient home is designed to consume less energy, reduce wasted energy, and minimise greenhouse emissions. The Australian government has different ratings and codes in place to measure the energy efficiency of a house. For instance, the Nationwide House Energy Rating Scheme (NatHERS) measures the energy efficiency of a home based on its design. It provides star ratings between 0 and 10, and the higher the rating, the better the design’s energy efficiency. Such houses are naturally comfortable in different weathers and need less energy to heat or cool.
If you plan to apply for a green loan, the lender may require you to buy a property that meets a minimum NatHERS star rating to be eligible. A NatHERS 6 star energy rating is generally the minimum requirement a home should meet to get a building permit in most Australian states and territories. You’ll most likely need a higher rating to qualify for a green home loan.
Some lenders might also approve you for a green home loan if you are refinancing to release equity to improve the sustainability standards of your house. Features that can improve the energy efficiency of your house and help you qualify for a green home loan include:
- Solar panels for your house
- Solar hot water systems
- Rainwater tanks
- Insulation
- Grey water treatment system
- Energy-efficient appliances
- Home ventilation systems
What are the benefits of green home loans?
More and more people are becoming environmentally conscious and want to take steps to minimise their impact on the environment. One of the ways in which you can reduce your environmental footprint is by reducing your energy consumption at home.
A green home loan can help by offering you a more competitive interest rate or reduced fees when you borrow money to buy or build an energy-efficient house. Some lenders may allow you to borrow up to 90% of the property price if you qualify for a green home loan. If you are a doctor or someone providing an essential service with incremental income, you are more likely to be eligible for a home loan with a low deposit.
With some lenders, you can also receive additional discounts if you exceed the minimum star rating to qualify for a green home loan.
While a green home loan rewards you for making an environmentally-friendly choice, a green home also saves you money in the long run. It helps you cut down your electricity consumption, saving you money on energy bills. As energy prices soar, reducing energy wastage can help you save hundreds of dollars that can be used to pay off your mortgage faster or meet other financial goals.
Besides long-term savings and increased comfort, green homes generally fetch a higher price than comparable but regular properties in a suburb.
Who offers green home loans in Australia?
Even though green home loans have potential benefits for both home buyers and the environment, the market for these home loans is relatively small. According to our sources, only a handful of lenders are currently offering green home loans. These include [loans.com.au, Summerland, Regional Australia Banks and some other lenders]. You can speak with a mortgage broker to check your options or hop to an online comparison site to compare deals from different lenders.
It’s worth remembering that lenders generally have strict eligibility criteria for green home loans. It would be best if you spent some time understanding these requirements before applying for a green home loan to minimise the chances of rejection.
It’s also a good idea to check the interest rates on standard home loans before applying for a green home loan. Even though some green home loans offer interest rate discounts, it’s not necessary that a green home loan will always be cheaper than a standard variable rate home loan. If you are not confident or feel confused about the process, you can seek help from a mortgage broker to find the right home loan for you.
