Green home loans are becoming increasingly popular in Australia as the need for climate action increases. An alarming amount of greenhouse gas emissions comes from the property sector, enticing property owners to seek more environmentally friendly options. Growing numbers of Australians are seeking ways to buy, build or renovate their properties to reduce their carbon footprints, and are seeking out green banks that can assist.
Currently, only a handful of lenders offer green home loans as part of their products, each with strict lending criteria meaning only a limited number of borrowers qualify. If you’re interested in a green home loan for your next purchase, build or renovation, read on for more information.
What is a green home loan?
Like regular home loans, a green home loan allows you to borrow money from a lender to purchase, build or renovate a property. However, these loans also aim to reward borrowers for choosing to live more sustainably. Some green banks are opting to present borrowers with competitive interest rates as an incentive to select properties that meet specific energy efficiency criteria in order to lessen their household’s environmental impact.
Some other borrower incentives may include:
- Interest rate discounts.
- Local, state and federal government cashback and rebates.
- Offer higher LVR of up to 95 per cent on home loans.
- Potential for additional funding from lenders to support sustainable home improvements.
- Borrowers can get an increased loan amount compared to standard home loans.
Are green home loans available in Australia?
While not every lender offers green home loans in Australia, there is a growing number of green banks. In Australia, the property sector accounts for around 23 per cent of greenhouse emissions. In an aim to work towards a greener Australia, the Clean Energy Finance Corporation (CEFC) is investing up to $60 million in green home loans.
Through the CEFC, Bank Australia and Regional Australia Bank are offering green home loans. Other lenders offering green home loans of their own accord are Commonwealth Bank, Firstmac and Gateway Bank.
What are some of the advantages and challenges that come with green home loans?
As with anything, there are advantages and disadvantages to choosing a green home loan.
These advantages include the following:
- The potential for a lower interest rate than standard home loans.
- Your energy-efficient home contributes to a more sustainable future by reducing your carbon footprint.
- Your energy bills while you’re building, renovating, or buying may be lower due to the sustainable design.
In contrast, some challenges of green home loans include:
- Limited lenders offering this loan product
- The lending criteria are strict and vary between lenders.
- Lenders may enforce fees and charges.
How can you qualify for a green home loan?
Qualifying for a green home loan is challenging. They are structured the same way other Australian home loans are, but they have additional criteria and are only available to borrowers whose properties are considered “green”. Some lenders will use the Nationwide House Energy Rating Scheme (NatHERS) to measure a home’s energy efficiency. This scheme gives your property a star rating out of ten that rates your home’s energy efficiency based on the design. The star rating is based on the home’s structure, construction materials and the climate in which it has been built.
Green home loan criteria
While criteria vary between lenders, most agree that your property should have been built within the last 12 months and have a minimum 7.0-star NetHERS rating. Plenty of features can contribute to qualifying your house for a green home. These include (but aren’t limited to):
- Rooftop solar panels
- Battery storage systems
- Solar hot water
- Double glazing
- Rainwater tanks
- Grey water treatment system
- Wind turbines
- Insulation
- 5+ star gas or electric heating
- Non-toxic building materials
If you’re looking to build a green home but aren’t sure where to start, the NatHERS website has free energy-efficient house designs available for download.
Why should you opt for a green home loan?
Choosing a green home loan means you’re choosing to help the environment and reduce your carbon footprint. There are plenty of reasons why you should choose this type of loan when purchasing, building, or renovating. Some of these are listed below.
- Compared to traditional homes in Australia, choosing a green home loan and making your property more energy-efficient means your home will have a significantly smaller carbon footprint.
- As your property is designed to consume less energy, your electricity bills will be lower. Energy-efficient green homes use 66 per cent less electricity, 51 per cent less water and produce 62 per cent fewer greenhouse gas emissions than the average Australian home.
- Your home is built to make living comfortable and practical while being mindful of the environment. Green homes are designed with proper ventilation and abundant sunlight. As these homes are built with low-toxic materials, there is a reduced risk of respiratory problems like asthma.
- Your property’s value should increase as the demand for green properties grows. This will help to increase its resale value.
- You may be eligible for discounted rates and rebates.
Green home loans and Inovayt
At Inovayt, we believe in and support the environment and creating a better future for the next generation. As such, we’re constantly looking for ways to decrease our carbon footstep and do our bit for the environment. We know the environment means a lot to you too, so we’re here to help you obtain a green home loan for your next purchase, build or renovation. New reports are constantly coming out that are educating us on how to do our bit for the environment, and our team of highly skilled mortgage brokers are keeping up to date to help find a suitable product for you.
If you’re ready to start the next stage in your home-buying journey – whether it be buying, building or renovating – talk to an expert mortgage broker on how you can qualify for a green home loan to do your bit for the environment. Our team are trained to help you find a lender that meets your needs. Get in touch today for a free meeting.
