What is a green home loan?
A green home loan is one that rewards borrowers for either buying, building or renovating a property to make it sustainable and energy efficient.
Some of the ways borrowers are rewarded for going green are:
- Banks and lenders offer discounts on their home loan interest rates.
- Cashbacks and rebates from local, state and federal governments.
- Offer higher LVR of up to 95% on home loans
- Some banks even provide additional funding to support sustainable home improvements.
- Borrowers can get an increased loan amount compared to standard home loans.
Are green home loans available in Australia?
Yes, there are a few banks and lenders that are offering green home loans.
With an aim for a greener Australia, the Clean Energy Finance Corporation (CEFC) is investing up to $60 million in green home loans.
According to the Australian Sustainable Built Environment Council Figures, the property sector accounts for around 23% of Australia’s greenhouse emissions.
Half of these emissions come from residential buildings:
- Heating, ventilation and air conditioning account for 40% of emissions.
- Appliances account for 25% of emissions.
- Hot water systems account for 23% of emissions.
With the introduction of green home loans, the CEFC hopes to encourage the construction and purchase of energy-efficient homes to reduce household emissions.
There are two lenders who are offering green home loans through CEFC.
- Bank Australia (Clean Energy Home Loan)
- Regional Australia Bank (Sustainable Home Loan)
Some banks and lenders are offering green home loans on their own accord:
- Commonwealth Bank
- Gateway Bank
What are its advantages and disadvantages?
|Advantages of green home loans||Disadvantages of green home loans|
|Enjoy lower interest rates||Limited lenders|
|Your energy efficient home reduces environmental footprint which contributes to a more sustainable future.||Strict lending criteria which varies from lender to lender.|
|Lower energy bills as you’re building, renovating or buying a home with sustainable design.||The lenders and banks could enforce fees and charges.|
Why should I opt for a green home?
There are several advantages to a green home:
- Your home will have a significantly smaller carbon footprint compared to the standard homes in Australia.
- You save on electricity bills as your home is designed to consume less energy. An energy efficient green home uses 66% less electricity, emits 62% less greenhouse gases, uses 51% less potable water compared to an average new construction project.
- Your home will be designed in an efficient way to make living comfortable and practical. Green homes are designed with proper ventilation and abundant sunlight. Furthermore, the homes are also built with low-toxic materials, which reduces the risk of respiratory problems like asthma.
- You can get access to discounted rates and rebates.
- The value of your property will increase, which would help its resale value. A study conducted in ACT revealed that even a half star energy rating increase in energy efficiency translated to a 2% increase in capital value.
What is the NatHERS rating?
The Nationwide House Energy Rating Scheme (NatHERS) home energy star ratings is a performance-based rating system that rates the thermal performance of a home on a scale of 0 to 10.
Homes which have a higher rating are considered thermally comfortable and affordable to run than those with lower ratings.
Here is what each NatHERS rating mean:
|No. of stars||Meaning|
|0 stars||The building shell does nothing to reduce the discomfort of hot or cold weather.|
|6 stars||This is the minimum standard in most states and territories. It is considered a good performance.|
|10 stars||The home does not require any artificial cooling or heating to keep you comfortable.|
Please note that NatHERS does not include hot water systems, lights and household appliances since these are replaced frequently.
How is the energy rating calculated?
NatHERS uses an accredited software that will model expected indoor temperatures based on data specific to the dwelling.
The data specific information includes information on:
- Size and function of the homes
- Size and specification of openings
- Building materials, windows and products
- Type of construction
- Dwelling orientation
Once these data are entered into the system, the software will then model how much cooling or heating the occupants need to stay comfortable during a typical year, factoring how the local climate heats and cools the house every year of each day of the year.
The total annual heating and the cooling requirement are then converted to the 10-star rating.
How to qualify for a green home loan?
Every lender has their own requirements a borrower must fulfill to get approved for a green home loan.
These customer owned banks are offering green home loans, under different names:
Clean Energy Home Loan
There are two ways you can qualify for a Clean Energy Home Loan:
- 7 Star+ criteria
- Property upgrade criteria
The loan can be for owner-occupier or investment loan and the loan amount must be less than $1.5 million. Furthermore, the borrower must be a resident of Australia and the property securing the loan is located in Australia.
The 7 Star+ criteria offers an interest rate discount for homes that meet a high standard of energy efficiency, and the property must have a 7 stars or higher NatHERS rating.
The property upgrade allows for a discount of up to five years to renovate an existing property with green home upgrades. There must be a 1 star improvement to the energy efficiency assessment.
The property should have three or more of the following upgrades within the last 12 months:
- Installation of real-time energy monitoring systems (Wattwatchers, Solaranalytics, etc.)
- A solar photovoltaic system with a minimum system size of 3kW.
- Energy storage system with a minimum system of 5kWh.
- Hot water heat pump or solar hot water system.
- Upgrade 75% or more of all windows by area to double-glazed and/or low-emissivity coatings.
- Upgrade underfloor, wall and ceiling insulation to levels set by the National Construction Code.
- Electric vehicle charging port and evidence of electric car ownership.
- Upgrade LED lights for 75% or more of all light fixtures.
- If the property has air conditioning, it must have an energy rating of 4 stars and above the Minimum Energy Performance Standards.
- If the property has a pool, there must be a pool pump with a energy rating of 7 stars under the Voluntary Energy Rating Labelling Program.
Sustainable Home Loan
To qualify for a Sustainable Home Loan:
- Must be owner-occupier.
- The minimum amount you can borrow is $500.
- The maximum loan term is for 30 years.
- Can build new home or renovate existing home.
- Home must pass the current minimum environmental standards according to the relevant state or territory.
- Must have at least ONE feature from List A and TWO features from List B.
|List A (Any one)||List B (Any two)|
|Grey water treatment system||Solar hot water|
|Solar power system (including PV)||Rain/storm water tank|
|Wind turbine||5 star+ Gas or Electric heating|
|Micro hydro system||External awnings|
|Double glazed windows (or better)|
Other bansk are offering green loans at competitive rates to make your existing property energy-efficient:
A major bank is offering loans to switch to solar and make your home energy efficient.
It is offering a low fixed rate to existing customers who have a home loan or investment loan.
The minimum loan size is $5,000, and the maximum is $20,000.
The loan to value ratio of your exisitng home loan or investment loan plus the green loan should not exceed 80%.
If you have multiple properties and home loans with the bank, you can apply for more than one green loan.
The green loan can only be used to buy or install eligible clean energy products:
- Solar panels with a system size equal to or greater than 6 kilowatts (kW) (and inverter if applicable)
- Battery packs with a system size equal to or greater than 5 kilowatt-hours (kWh)
- Solar hot water system with a minimum system size equal to or greater than 250 litres (L)
- Heat pump hot water system with a system size equal to or greater than 250L
- Electric vehicle charging station(s)
A Clean Energy Council member must install these products.
The green loan cannot be to recoup purchases and installations already done to the property.
Green loan discount
A non-bank lender is offering a discount on your home loan interest if your home has a NatHERS of at least 7 Star.
- The existing home was built within 12 months and has a minimum 7.0 Star NatHERS rating.
- If it’s an apartment block, each apartment will have its rating.
- If you are building a green home, the builder should assist you in getting a NatHERS certificate from an accredited assessor along with building plans.
- Solar photovoltaic (PV) systems / Solar Panels
- Solar battery storage system
- Rain / Storm Water Tank
- Certified double-glazed windows
- Solar hot water system
- 5 Star + Gas or Electric Heating
- External awnings
- Solar pool heating system
- Home insulation that meets government standards for a geographic area
- Energy-efficient LED lights in more than 75% of the property
- The floors must have a 85 mm burnished slab on ground, carpet to walk in robe and ceramic tiles must be used in the bathroom, ensuite and laundry.
- The ceilings must be 10 mm plasterboard, ceiling bates and eaves of at least 5mm.
- The roof must have a steel deck with colorbond.
- The external walls facing north must have 9 mm weatherboards on 40 mm nominal battens, anti-glare foil, medium colour finish, insulation and 10 mm plasterboard.
- The internal walls must have 10 mm plasterboard on studs and 110 mm single-brick as detailed on the floor plan.
- To prevent air leakage and for draught sealing, windows and sliding doors must have weather strips, hinged external doors must have seals and weather strips.
- Timber frames with single clear glazing for windows in the entry sidelight and laundry door.
- Aluminum frames with clear glazing must be used for casement and awnings of windows.
- All sliding doors must have aluminum frames with single clear glazing.
- 48% of respondents supported a mandatory labelling scheme for energy efficiency rating for houses for sale.
- 60% of respondents said energy efficiency would be a factor when buying a home.
- Only 26% of households said their home was energy efficient with a further 36% saying they don’t know whether they have a problem.
- Talk to their former customers and referees and understand their experience of working with the builder.
- Look at buildings they have built and designed.
- Check if your builder has an optional certificate from either the Housing Industry Association (HIA) or Masters Builders Association (MBA). This shows your builder has adequate knowledge of the use of sustainable materials and construction.
- Check to see if they have won any sustainability awards.
- Get in touch with local builders as they would have excellent connections with local suppliers.
You can borrow up to 90% of the property value.
The minimum loan size is $50,000, and the maximum is $2 million.
Green home loan at competitive rate
A customer owned is offering a competitive rate for making energy-efficient enhancements to your home.
The minimum loan size is $250,000, and the maximum is $2 million.
You can borrow up to 80% of the property value.
To qualify for a green home loan, your property must have at least THREE of the following:
How to achieve a 7 star energy rating home?
A 7 star energy rating can be achieved through the use of passive design. These other factors should be considered as well:
The requirements will differ based on the climatic zones of each Australian city. You can refer to https://www.yourhome.gov.au/house-designs/specifications for more information.
What is a passive house design?
Passive design is the key to sustainably building or renovating a green home.
A passive design takes into consideration the climate to maintain a comfortable temperature throughout the home. It uses natural heating and cooling sources like the sun and wind to heat or cool your home.
By using passive design, it reduces the need for the use of external heating and cooling, which saves on electricity bills.
An economical way to make a home with passive design is to plan and build one from scratch. However, you can also make small improvements and renovations to your existing home so it incorporates the principles of passive design.
A good passive design house helps you to achieve a lifetime of thermal comfort, low energy bills and low greenhouse gas emissions.
Frequently asked questions
Can I apply directly with CEFC?
No, the CEFC does not directly provide finance to build or renovate a green home, and is not involved in financing decisions.
You can either contact the bank or use the services of a mortgage broker.
Why is the CEFC involved in providing green home loans?
CEFC’s aim is for newly built homes to have strong energy efficiency that delivers the smallest carbon footprint.
By providing green home loans, they aim to fill the gap in the market by giving builders home buyers an incentive to look towards sustainable home designs.
Is there a market demand for green homes?
Yes, there is a growing demand in Australia for green homes.
According to a 2018 Energy Consumer Sentiment Survey:
How to choose a green home builder?
Here are some tips on how you can choose the right green home builder for your home:
What rebates and incentives are offered for green home?
The local, state and federal government of Australia have offered several rebates and incentives for designing a sustainable home or the use of energy efficient systems and appliances to make your home energy efficient.
For instance, The Appliance replacement offer provides NSW households with 40% discount on energy-efficient fridges and 50% discount on energy efficient televisions.
You can check out more information regarding government incentives and rebates on https://www.energy.gov.au/rebates
Want to apply for a green home loan?
If you’re thinking of buying, building or renovating your home to be energy efficient and sustainable for the environment, a green home loan can help achieve your goal.
Banks are offering low interest rates and discounts to reward your efforts.
Our mortgage brokers are here to help. Call us on 1300 889 743 or enquire online for a free no-obligation assessment.