Reduce your environmental footprint and increase your savings with a green home loan.
The Green Loan Scheme was established to encourage Australian residents to reduce their environmental footprint by installing solar panels and other tools in order to reduce water and energy consumption. The scheme has now been abolished by the Australian Government, however, many banks are still encouraging a ‘greener’ approach through their own special offers and incentives.
Green home loans should be considered when looking for a lender as they reward the environment and your bank balance.
What is a green home loan?
For anyone who is concerned about lessening their environmental impact, whilst also saving money on their mortgage, a green home loan is something you should be considering. Green home loans are designed to encourage borrowers to buy, build or improve their homes in an environmentally friendly way. They typically offer discounted interest rates for houses that are energy efficient, and lessen their environmental footprint.
Some lenders will reward you with lower interest rates if your house meets a certain criteria that includes things like solar panels, double glazing, water storage tanks or an alternative power supply. Be sure to check with each lender what you need to be eligible for their green home loan.
How do green home loans work?
Generally, Green home loans work the same as regular home loans. You borrow money from a lender to buy, build or renovate property, and you pay the loan back over a certain amount of time at a certain rate of fixed or variable interest.
The main difference is, your house will have to meet a certain criteria to be eligible for the loan. Some lenders will only require that you have solar panels, like Hunter United, while Bendigo Bank will need you to have water storage tanks, double glazing, or an alternative power supply. Criteria requirements will vary from lender to lender.
In return for meeting this criteria and making your home environmentally friendly, lenders will generally offer a lower interest rate, a redraw option and flexible repayment options. As with the criteria requirements, general loan features will depend on the lender you choose.
What are the types of green home loans available?
Below are some green home loans available at the time of writing.
- Hunter United Green Home Loan. This green home loan is offered to anyone that uses solar energy panels, although as with all loans, your current financial situation will also be taken into consideration. The minimum loan amount is $200,000 and gives borrowers a rate discount.
- Bendigo Bank Green Home Loan. The Green Home Loan aims to make building or buying a home as affordable as possible. The minimum loan amount is just $5,000 and has a variable interest rate. You are able to choose from flexible payment options, as well as being able to link it to an offset account. There are some criteria requirements that must be in place to be eligible. The house must have at least two of the following: double-glazed windows, a solar hot water heater or a water storage tanks. If you don’t have these, you can still be eligible if the house has an alternative power supply (solar, wind, hydro, etc.).
- Southern Cross Credit Union Green Home Loan. If your home can achieve a 7 star or above rating according to the Naitionwide House Energy Rating Scheme SCU will offer you a 0.7% discount off the standard variable interest rate. So you have all the features of the SCU Standard Variable Home Loan but a discount off the interest rate, they also allow for a green discount off the fixed rate home loan as well.
Pros and cons of green home loans
- Reduce your environmental footprint. The most obvious benefit of these loans is that you will be able to contribute to a more sustainable future, reducing your environmental impact.
- Low interest rates. The main draw card of a green home loan is that you are rewarded with lower interest rates in return for your choice to make your house environmentally friendly.
- Lower bills. By switching to more energy efficient power options, you could potentially save more on your electricity and water bills.
- Strict criteria. Most green loans have a very strict and specific criteria your house will have to meet in order to be eligible. The criteria will differ from lender to lender, and the less environmentally friendly tools your house has, the small array of lenders you will have to choose from.
- Fees and charges. As with any loan, be aware of fees such as redraw facility charges.
Things to avoid about green home loans
Be aware of hidden fees and charges associated with these loans. Due to such low interest rates, lenders may try to make up some money through redraw facility fees and monthly service fees.
FAQ about green home loans
What criteria do I have to meet to be eligible?
The criteria will vary from lender to lender. Most banks will have a list of various environmental tools and devices that will need to be a part of your property. Once you meet this criteria, the lender will generally also assess your current financial situation and credit history.
Who is this type of loan suited to?
Anyone who wants to reduce their environmental footprint should definitely consider this loan. Anyone who planning on purchasing or building an environmentally sustainable house will benefit greatly from the low interest rates that are offered.
What interest rate could I expect to pay on this type of loan?
The interest rates will fluctuate with market interest rates, but will generally hover just above or below the 5.00% mark, depending on the lender.