Green Home Loans
Australia is geared towards a greener, more sustainable path. And this is evident in mortgage products as well. Green home loans reward homeowners who focus on incorporating green features in their homes.
These innovative home loans aim to incentivize and support homeowners in adopting environmentally friendly features in the home.
If you buy, build, or renovate, you can inquire about green home loans to finance a more sustainable design.
Let’s discuss the concept of green home loans in Australia, their benefits, and eligibility criteria.
What is a green home loan?
The government aims to create a more sustainable Australia, and residential properties are among the areas that can mitigate the impact of climate change. The housing market is responsible for 23% of the total greenhouse gas emissions, which is why the country promotes more sustainable practices in this sector.
Green home loans are the country’s initiative that seeks to encourage eco-friendly design and construction. Green home loans incentivize eco-friendly measures when building, purchasing, or renovating homes.
The idea is that with residential homes built today lasting several decades, if they are built to minimize greenhouse gas emissions now until the future, these properties could make a huge difference to offset harmful environmental effects.
This type of mortgage is like a regular home loan except that it features discounted interest rate for properties that meet certain energy efficiency standards.
Examples of features for a greener home include:
- Solar panels
- Solar battery storage system (or other alternative power supply)
- Water storage tanks
- Double glazed windows
- Insulation
- Solar pool heating system
- Energy-efficient lights in more than 75% of the property
- 5+ star gas or electric heating system
Green home loans are suitable for both new homes and for major energy-efficient upgrades to existing homes.
Incentives include lower interest rates, reduced fees, or even cash back rewards for implementing sustainable features in your home. Borrowers can also get an increased loan-to-value ratio (LVR) in some instances.
Be sure to check with each lender what their specific criteria is to be eligible for green home loan.
Green home loans: NatHERS
When applying for a green home loan, most lenders require a rating of 7 stars of higher from the Nationwide House Energy Rating Scheme (NatHERS).
NatHERS is calculated by an accredited assessor who can rate the home design based on its energy efficiency features. The rating system evaluates layout, construction materials and methods, heating and cooling requirements, and dwelling orientation.
The NatHERS rating focuses on structure more than interior add-ons. In short, it does not assess things like household appliances, hot water systems, or lighting because these may be replaced several times over the course of the home’s lifetime.
Whether you are building or renovating, you can apply for a green home loan with NatHERS details in mind. Specifications vary, but the property should have been built within the last 12 months and have a minimum 7.0-star NatHERS rating out of their 10 star-system.
Lenders offering green home loans
There are only a couple of lenders in Australia, but the sector is growing especially with Australia’s Clean Energy Finance Corporation (CEFC) investing $60 million for green home loans.
Below are lenders offering green home loan products:
Bank of Australia. The customer-owned bank now offers a Clean Energy Home Loan in partnership with the CEFC. They have a discounted rate if you are buying a 7+ star rated home or renovating to include elements like solar panels or insulation. The Clean Energy Home Loan is available for new and refinancing borrowers.
Commonwealth Bank. While not strictly a green home loan product, the Commonwealth Bank has a 0.99% interest rate deal to cover the cost of installing sustainable technology features.
NAB. NAB provides owner occupiers with energy-efficient homes with 1.00% p.a. discount for a deposit of 20% or less to borrow for a green home. They also offer LMI discounts.
Regional Australia Bank. Their Sustainable Home Loan is a variable-type product for owner occupiers who want to pursue sustainable housing.
loans.com.au. This retail brand offers discounts on green home loans and a Solar Home Loan product that are built less than 12 months and a NatHERS rating of 7+ stars.
Gateway Bank. This mutual bank offers a discounted variable rate on green home loans for properties with a NatHERS rating of 7+ stars.
Why consider a green home loan?
- Financial incentives – One of the primary advantages of green home loans is the potential for financial savings. Lenders offer lower interest rates or reduced fees, resulting in reduced monthly repayments and long-term savings. These financial incentives make sustainable home improvements more affordable and encourage homeowners to consider environmentally friendly options.
- Energy efficiency – Green home loans encourage homeowners to invest in energy-efficient features such as solar panels, energy-efficient appliances, insulation, and water-saving fixtures. These improvements can significantly reduce energy consumption, resulting in lower utility bills and long-term cost savings.
- Reduce environmental footprint – By promoting sustainable practices, green home loans contribute to reducing carbon emissions and environmental degradation. Homeowners who choose energy-efficient solutions will significantly decrease their carbon footprint, helping Australia achieve its climate change mitigation goals.
- Property value – Green home improvements not only enhance the overall sustainability of a property but also have the potential to increase its market value. Eco-friendly features such as solar power systems, rainwater harvesting, or efficient heating and cooling systems can make a property more attractive to potential buyers.
Green home loan disadvantages?
- Strict eligibility criteria – Green home loans will have a specific set of guidelines to satisfy the “green” properties lenders look for. Applying for a green home loan will be more challenging than a standard home loan, as you must pass the NatHERS rating system, have a certain credit rating, and income bracket to be eligible.
- Limited options – Green home loans are new products, so you’ll have limited options compared to just searching for a standard owner-occupier mortgage.
- Higher costs – Green home features like solar panels and double-glazed windows can be pricier upfront. Opting for a green home like solar panels and double-glazed windows later (and contributing to the eco-friendly cause), these sustainable improvements won’t come cheap.
Interested in green home loans?
Green home loans are new finance products that empower homebuyers and renovators to reduce their carbon footprint. By making eco-friendly real estate options more accessible through these green home loans, every client could be rewarded with higher LVR, long-term savings, and attractive mortgage incentives.
As there are only a few niche lenders who really “Get”these loan types, our home loan professionals are available if you have any questions. Call us today to get started.
