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 upto 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.

There are two lenders who are offering green home loans through CEFC.

  • Bank Australia (Clean Energy Home Loan)
  • Regional Australia Bank (Sustainable Home Loan)

Furthermore, there are other lenders who are offering green home loans on their own:

  • Hunter United (Green Home Loan)
  • Maleny Credit Union (Green Home Loan)
  • Bendigo Bank (Generation Green Home Loan)

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.

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.

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.

Bank Australia is offering three different ways a borrower can qualify for a green home loan.

  • 7 Star+ criteria (currently available)
  • Property upgrade criteria (will be available soon)
  • High Energy Efficiency criteria (available from 31 March 2020)

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.

A High Energy Efficiency home can qualify for a 0.5% discount p.a. for new or existing homes that meet the three sustainability features; a 8 star NatHERS rating, a solar system and a battery or real-time-in-home energy monitoring system.

Regional Bank Australia has its own qualifying criteria:

  • 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)

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
  • Location

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 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 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.

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.

How to build a passive design home in Australia?

  • Australia has eight main climate zones. Understanding the characteristics of each of these climate zones helps to gain an understanding of the principles of thermal comfort. These zones also determine the NatHERS rating as well.
  • The orientation of your home plays an important role in taking advantage of the climatic features. Homes located in tropical climates should be north-facing which allows maximum exposure to the sun and easy shading of walls and windows during summer. This reduces your dependence on auxiliary heating and cooling.
  • The use of effective shading like eaves, window awnings, shutters, etc can block up to 90% of the sun. Be sure to calculate the sun angles for your location, and consider climate and house orientation to maximise shading for thermal comfort.
  • Design for passive solar heating keeps out the summer sun and lets in winter sun while creating an envelope that keeps heat in during winter and allows heat to escape during summer.
  • Design for passive cooling allows for air movement to keep the home cool.
  • Sealing your home is a simple upgrade you can use to increase your comfort and reduce energy bills. Air leakage accounts for 15% – 25% of heat loss. Sealing your home improves insulation levels.
  • Besides creating a barrier to heat flow, insulation also helps with weatherproofing and soundproofing. It helps to reduce heating and cooling bills and reduce greenhouse gas emissions.
  • Thermal mass is the ability of a material to absorb or store heat energy. Using materials with high thermal pass gives you significant savings on heating and cooling bills.
  • While glazing windows and doors bring in light and fresh air, it can also be a source of unwanted heat gain during summer and heat loss during winter. Therefore, it’s important to select the right glazing systems for your orientation and climate.
  • Skylights are a natural source of natural light and also improves natural ventilation. Unfortunately, they are also a source of unwanted heat gain in summer and heat loss in winter. Therefore, take careful consideration when selecting skylights its size and spacing.

What star rating is achievable in each Australian city?

City Base Rating Maximum Rating Climate Zone
Adelaide 6.8 8.4 Warm temperature
Brisbane 6.3 8.4 Warm humid summer, mild winter
Cairns 6.4 7.4 Hot humid summer, warm winter
Canberra 7.0 8.4 Cool temperature
Darwin 6.0 7.0 Hot humid summer, warm winter
Hobart 6.6 8.1 Cool temperature
Melbourne 6.2 8.1 Mild temperature
Perth 7.1 8.1 Warm temperature
Sydney 7.1 9.0 Warm temperature

Source: YourHome

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 will have to directly contact and apply with the lenders.

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:

  • 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.

How to choose a green home builder?

Here are some tips on how you can choose the right green home builder for your home:

  • 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.

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

After signing the Paris Climate Agreement, the Australian government is committed to a global goal of zero net commissions by 2050.

The construction, operation and maintenance of buildings contribute almost a quarter of greenhouse gas emissions in Australia.

As the population in Australia is estimated to reach 31 million in 2030, more homes will be needed.

That’s why it’s best to start building a green home today, for a more sustainable future.

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