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Loans for energy-efficient upgrades

How to find finance for energy-efficient upgrades to your home

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In today’s environmentally conscious world, many of us are looking for ways to make our homes more energy efficient. As well as being easy on the environment, these upgrades can also help lower your power bills.

Unfortunately, solar power systems and power-saving appliances don’t come cheap. Let’s take a look at the finance options available to help you improve your home’s overall energy efficiency.

What’s the best way to finance an energy-efficient upgrade?

If you need additional funds to help complete an energy-efficient upgrade to your home, there are several finance options available:

  • Green personal loans. Green personal loans provide the funds you need to buy or install energy-efficient products and systems. With terms ranging from six months to seven years and flexible borrowing limits, these loans often have minimal fees and better interest rates than you would find on a standard personal loan. If you have good credit, you can use green personal loans to buy solar panels, solar hot water heaters, energy-efficient air conditioners, rainwater tanks, energy-efficient appliances and much more.
  • Energy-efficiency loans. Energy-efficiency loans are unsecured loans that can give you the funds you need to make upgrades to improve your home’s energy efficiency. If you want to maximise short-term cash flow but you don’t want to offer any assets as collateral, this type of finance might be a good choice. However, it comes with higher interest rates than some other options (such as a mortgage redraw), and these loans are better suited to large projects rather than smaller upgrades.
  • Mortgage redraw. Another option worth considering is redrawing on your home loan to access the funds you need to make upgrades to your home. This allows you to access the funds at your home loan interest rate, which is typically much lower than personal loan interest rates, and to avoid the extra cost and inconvenience of taking out a separate type of finance. However, you’ll need to be committed to paying your mortgage off as quickly as possible, as only making the minimum monthly repayment will mean you end up paying much more for your energy-efficient upgrades in the long run (thanks to interest charges).
  • Government finance options. The Clean Energy Finance Corp is an Australian Government authority that offers several programs designed to provide clean energy and energy-efficiency improvements for small businesses, manufacturers, the agricultural sector and small commercial properties. It also partners with a range of lenders to offer discounted finance to people looking to perform energy-efficient upgrades. Examples include the NAB Energy Efficient Bonus Program, the Commonwealth Bank Energy Efficient Equipment Finance Program and the Westpac Energy Efficient Financing Program.
  • Interest-free loans. Some lenders also specialise in offering interest-free financing for energy-efficiency upgrades. Once you sign up online, you can shop with the lender’s partner retailers to buy a range of products and home improvements interest-free. These loans allow you to borrow up to approximately $30,000 to fund home improvements, but you’ll need to be aware of the upfront and ongoing fees that apply. You should also be aware that these schemes may also feature higher upfront purchase prices for the products you buy.

How can I upgrade my home to be more energy efficient?

There are several important things you can do to help improve your home’s energy efficiency:

  • Install a solar power system. Solar systems harness clean energy from the sun to power your home. Check out our page on solar panel finance for more details on how to fund the purchase of solar panels.
  • Install a solar hot water system. Older hot water systems can be big energy users, but modern solar hot water systems use clean, renewable energy from the sun and can substantially lower your power bills.
  • Buy energy-efficient appliances. Use the Energy Star rating scheme to find the most energy-efficient washing machines, dryers, fridges, dishwashers and more.
  • Buy energy-efficient heating and/or cooling. Older air conditioners and heaters can churn through energy like there’s no tomorrow, so consider upgrading to a modern, more energy-efficient option. Solar pool heaters can also provide a cleaner, renewable way to keep your pool temperature at just the right level all year round.
  • Install insulation. Insulation for the ceiling, floor and walls can help your home stay at a comfortable temperature all year round, reducing heating and cooling costs.
  • Invest in double glazing for windows. Just like insulation, double glazing can help keep the heat out in summer and lock out the cold in winter.

How much will it cost to upgrade my home to be more energy efficient?

Costs vary substantially based on the upgrades you want to make to your home. For example, buying an energy-efficient washing machine or dryer could be less than $1,000, though some high-end models with excellent energy ratings can be a little more expensive.

However, some other upgrades can be significantly more expensive. A decent-sized solar power system could set you back more than $6,000, while buying a split-system air conditioning unit and having it installed could cost $5,000.

There are several factors that affect total cost, including the upgrades you make, the size of your home and installation/labour costs where you live, so make sure to shop around for the best deal.

How do energy rebates work?

There are several government initiatives in place across Australia to help you save money when upgrading your home to be more energy efficient:

  • Renewable power incentives. Right across Australia, homeowners who install small-scale renewable energy systems or eligible hot water systems can receive help with the upfront cost of purchasing and installing those systems under the Small-scale Renewable Energy Scheme.
  • Electricity feed-in tariffs. The extra energy you generate from small-scale wind turbine, solar or hydro systems and then feed back into the grid allows you to receive a renewable energy feed-in tariff.
  • Home energy incentives. The Energy Saver Incentive in Victoria and the Residential Energy Efficiency Scheme (REES) in South Australia offer discounts to help homeowners add insulation, buy more efficient heating and cooling systems, and perform a range of other upgrades.
  • Appliance purchases. NSW’s Energy Efficient Fridge and Television Discounts program allows some concession card holders to save up to 40-50% when replacing old TVs and fridges, while Victoria’s Home Energy Incentive allows you to access discounts on a range of energy-efficient appliances if you buy from a participating business.

How can I compare my finance options?

Remember to consider the following factors when comparing different finance options:

  • Interest rate. The interest rate is a crucial factor that determines the overall cost of your loan, so shop around to compare the rates on offer. Fixed- and variable-rate personal loans are available.
  • Fees. You’ll need to check the fine print for details of any upfront and ongoing fees that apply, including establishment fees and monthly charges. These fees can quickly add up and have a significant impact on the total cost of the loan.
  • Comparison rate. The personal loan comparison rate includes the interest rate and fees that apply to a loan and reflects the true value of different finance options. Make sure to check the comparison rate of any option you’re considering.
  • Loan amount. Check the minimum and maximum loan limits to make sure the finance option is suitable for your needs.
  • Repayment schedule. How often will you need to make repayments (weekly, fortnightly or monthly) and how much will the regular repayment amount be? Also remember to check the loan term to work out your total cost over the life of the loan.
  • Repayment flexibility. Can you make additional repayments and pay the loan off early without incurring any extra fees?

Am I eligible for finance to make my home more energy efficient?

To qualify for an energy-efficiency loan, you will need to meet the following criteria:

  • You must be 18 years old or older.
  • You must be an Australian resident.

Other eligibility criteria vary from lender to lender. While most lenders will require you to have good credit, others specialise in offering finance to borrowers with bad credit.

There will also be specific requirements concerning the upgrades you have planned. For example, your lender may only offer financing for specific energy-efficient upgrades, so check the terms and conditions or contact the lender directly for full details.
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