With growing awareness of climate change and rising demand for eco-friendly living, green home loans are fast becoming an important financing option for homeowners and property investors in Australia. Green home loans offer a unique opportunity to invest in sustainable living and access long-term savings when building, buying or renovating property. If you’re considering going green in your home, here’s what you need to know about green home loans.
Understanding green home loans
Green home loans can be a smart choice for anyone looking to invest in an eco-friendly home, providing a cost-effective way to reduce your carbon footprint.
A green home loan is much like a traditional home loan, except it offers discounted interest rates and flexible terms for properties that meet certain energy efficiency standards.
While each lender has its own criteria properties need to meet in order to be eligible for a green home loan, typically new and existing homes should have certain features, including:
- Solar panels
- Insulation
- Double glazing
- Solar hot water systems
- Water tanks
- Energy storage system
The home generally also has to meet or exceed a seven star NatHERS rating to be eligible for a green home loan.
The pros and cons
There are a number of advantages to owning an energy efficient home, and being able to access lower interest rates and more flexible terms is an important one. However, like any financial product, green home loans come with their own set of disadvantages too, and it’s essential to weigh up the pros and cons before deciding if this financial product is right for you.
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Pros |
Cons |
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Lower interest rates: To incentivise homeowners to invest in environmentally friendly homes, and to show their own commitment to supporting sustainable living, most green home loans offer lower interest rates than traditional home loans. What’s more, having an energy efficient home means you’ll save on utility bills too. |
Eligibility criteria: Unlike traditional home loans, green home loans have far stricter eligibility criteria. Generally, the property will need to have at least a 7 star NatHERS rating and/or have sustainable features. |
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Higher LVR: Some lenders allow up to 95% LVR, which means you could get a green home loan with as little as 5% deposit, but you will still need to pay Lenders Mortgage Insurance (LMI). |
Initial outlay: The upfront cost of installing eco-friendly features can be costly. |
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Environmental impact: Investing in sustainable upgrades lowers your carbon footprint and contributes to a healthier planet. |
Limited lender options: Not all financial institutions offer green loans, which can limit your choice of lenders. |
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Increased property value: Energy-efficient homes usually command higher sale prices in the property market. |
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Access to government incentives: Green home loans can unlock access to government rebates and tax credits. |
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Lenders offering green home loans
As more lenders recognise the importance of incentivising sustainable living, green home loans are becoming more accessible in Australia. A number of lenders already invest in homes that are efficient, comfortable and healthier for homeowners and the environment, including Bank Australia, Commonwealth Bank, Firstmac, Suncorp and NAB.
Applying for a green loan
If you’re ready to take the next step toward sustainable home ownership by exploring green home loans, work with a mortgage broker from Mortgage Express to get expert advice about accessing a loan that’s right for you.
If you’re considering going green in your home, talk to the team at Mortgage Express about the right green home loan for you.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
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