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Are you concerned about climate change and considering building or buying a green home? With nearly a quarter of Australian greenhouse gas emissions coming from the property sector, green home loans are becoming more and more popular in Australia.
In this comprehensive guide to green home loans in Australia, we’ll share everything you need to know about qualifying for and obtaining a green home loan and which banks offer the best loan products in this space.
So, whether you are looking to use a mortgage broker in Brisbane or are seeking other financing options to build, buy or renovate a green home, this guide is for you.
Quick Summary
- Green home loans require homes to meet specific energy efficiency criteria.
- Qualification often requires a 7+ star NatHERS rating or other eco-certifications
- Major lenders offering green loans include CommBank, Loans.com.au, Gateway Bank, and Bank Australia.
- Benefits include lower interest rates, higher LVRs, and potential energy bill savings.
- Drawbacks include limited lender options and strict qualification criteria.
- NatHERS ratings measure a home’s energy efficiency on a 0-10 scale.
- To achieve a high rating, homes should use passive design principles and energy-efficient features.
- Green loans can be for new builds, purchases of efficient homes, or renovations to improve efficiency.
What Is A Green Home Loan?
A green home loan is a type of loan that encourages homebuyers to buy, build or renovate their homes in an environmentally friendly way. This is usually done through an interest rate discount, but only if your home passes one or more eco-friendly certifications.
As an added bonus, some lenders offer up to a 95% loan-to-value ratio (LVR) on green home loans, which is great if you have a small deposit. In addition, banks may offer a higher loan amount compared to a regular home loan.
With the average Australian household emitting about 18 tonnes of greenhouse gasses every year, the government is also offering incentives and rebates for homeowners who want to become more efficient in their use of energy.
Read more: Home Loans Brisbane: The definitive guide
Benefits Of Green Home Loans
Green home loans offer several advantages for Australian homeowners:
- Lower interest rates: Most lenders offer discounted interest rates for green home loans, which can lead to significant savings over the life of your mortgage.
- Higher borrowing capacity: Some lenders may allow you to borrow more with a green home loan than a standard mortgage.
- Reduced energy costs: Energy-efficient homes typically have lower running costs, saving you money on utility bills.
- Increased property value: As sustainability becomes more important to buyers, energy-efficient homes may command higher resale values.
- Environmental impact: By choosing a green home, you’re contributing to reducing Australia’s carbon emissions and promoting sustainable living.
- You may be eligible for additional rebates and incentives from state and federal governments for energy-efficient home features.
Green Home Loan Vs Regular Loan
A green loan is only for homes that meet certain criteria that make them energy-efficient, while a regular home loan is for any home.
The CSIRO recently found that only 10% of new homes currently being built received a 7-star NatHERS rating or higher and would be considered energy efficient and, therefore, qualify for a Green Home Loan.
Some of the differences between a regular loan and a green home loan include:
- Green home loans require you to meet strict criteria for things like heating, cooling, building materials, etc.
- Green loans sometimes have higher LVR than regular loans.
- Green home loans tend to have lower interest rates than regular loans.
- Some green loans do not offer an offset or redraw facility. So, make sure to talk to your mortgage broker about the options available to you.
However, both green and regular loans come with fixed and variable rates.
Read more: Fixed interest rates
How To Qualify For A Green Home Loan
To qualify for a green home loan in Australia, you’ll generally need to meet one or more of the following criteria:
- The home must be owner-occupied (some lenders may offer options for investors)
- Have a 7-star (or higher) rating from the Nationwide House Energy Rating Scheme (NatHERS)
- Hold a Residential Efficiency Scorecard with a 7 or more star rating
- Possess Passive House Certification
- Achieve a Green Star, Design & As-Built score of 8 points or more on the credit ’15 Greenhouse Gas Emissions’
- Meet specific energy-efficient features as outlined by individual lenders (e.g., solar panels, double-glazed windows, etc.)
It’s important to note that criteria may vary between lenders, so it’s best to consult with a mortgage broker or check with individual banks for their specific requirements.
Read more: Upgrading your home
Best Green Home Loans In Australia
A number of lenders in Australia now offer green home loans, and the list is growing every day. The main difference is that some banks will offer a Green Home Loan to new customers on newly purchased homes or to build a new home.
Other banks will offer their green home loans as a small top-up, up to $20,000, which can be used to “greenify” your home by adding solar panels and battery packs.
Here’s a list of the current offers, how to qualify, and what they offer (current as of November 2024):
CommBank (CBA)
The Commonwealth Bank offers two types of green loans: one is for existing customers to ‘greenify’ their existing homes, and the other is to buy or build an environmentally home.
This offer is for both existing and new bank CBA customers. It allows an entire home loan to buy, or build an energy-efficient home at a very discounted rate.
How to qualify: You must meet one of the two following criteria:
- Option 1: Your home is a certified Green Building Council of Australia (GBCA) Green Star Home or;
- Option 2: Your home meets all of the following criteria:
- Nationwide House Energy Rating Scheme (NatHERS) = 7 stars or greater
- Electrified through installation of a heat pump hot water system and no gas
- Solar PV with a minimum size relative to the size of the house:
- Up to 150m2 = 5.5kWe
- 150 – 250m2 = 7.5kWe
- 250 – 350m2+ = 10kWe
What they offer:
- 6.31% Standard Variable Rate for Owner Occupiers making Principal and Interest repayments with a Wealth Package and at least a 20$
- Available to other eligible borrowers – interest rates available on application.
CBA also offers a small loan to existing home loan customers who want to invest in clean energy products.
How to qualify:
- You are an existing CommBank home loan customer.
- Existing eligible home loan balance must be $150,000 or more (not including available redraw balance)
- The loan is secured against a single property and is not an apartment or commercial property
- The loan-to-value ratio of the existing home or investment home loan plus the new loan does not exceed 80%
- The installation address of the eligible small-scale renewables matches the address listed as security for the loan
- 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-hour (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)
What they offer:
- Highly discounted interest rates – 3.99%
- Loans up to $20,000
- No monthly fees
How to qualify:
- Your home must be less than 12 months old
- You must get a NatHERS certificate from an accredited assessor, showing a 7.0-star natHERS rating or higher
What they offer:
- 5.99% discount variable rate
- Add an offset sub-account for 0.10%
- No monthly, annual or ongoing fees
More info here.
Gateway Bank offers two types of green home loans:
How to qualify:
- The property must have a Nationwide House Energy Rating Scheme (NatHERS), or a Residential Efficiency Scorecard rating of 7 Stars or higher for energy efficiency.
- New builds or construction plans that have been certified with a 7-Star NatHERS or Residential Efficiency Scorecard rating are also eligible.
- For security property in the ACT, which has its own energy rating system, a certificate from a rater licensed in the ACT showing at least a 7-star rating is also acceptable.
What they offer:
- A 0.25% green loan discount from their standard premium package home loan
- 5.95% interest rate per annum
- No establishment fee
- 100% offset account
- Unlimited extra repayments and redraw facility
How to qualify:
- Option 1: Your property has a Residential Efficiency Scorecard certificate completed by an accredited assessor showing an energy efficiency rating between a minimum of 4-star or up to a maximum 6.9-star rating.
- Option 2: You’re looking to make environmental enhancements to your home – you will need a Residential Efficiency Scorecard certificate completed by an accredited assessor showing an energy efficiency rating between a minimum 4 star and up to a maximum 6.9-star rating within 12 months of the loan-funded date.
- Option 3: Your property has at least 3 of the following environmental features:
- Solar photovoltaic (PV) systems
- 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 your geographic area
- Energy-efficient LED lights in over 75% of the property
- Split systems, evaporative coolers or star-rated zoned air conditioning units with either a minimum energy rating of 4/6 stars or minimum of 6/10 stars
- Gas Hot Water System
What they offer:
- A 0.15% discount from their standard premium package home loan
- 6.15% interest rate per annum
- No establishment fee
- 100% offset account
- Unlimited extra repayments and redraw facility
More info here.
How to qualify:
Must be used for a verifiable green initiative:
- Solar panels
- Solar battery
- Solar inverters
- Solar heating and cooling
- Rainwater tanks
- Energy Efficient renovations
What they offer:
- Fixed rates from 7.37%
- Minimum loan amount of $2,001
- Maximum loan amount of $75,000
- No fees for early repayment or termination
Bank Australia offers three different home loan products for green homes.
How to qualify:
- Home must be built after 1 January 2020
- You must meet one or more of the below criteria:
- NatHERS rating of 7 stars or higher
- ACT only: Non-accredited NatHERS certificate with a 7+ star rating plus an ACT Energy Efficiency Rating certificate with the same rating
- Passive House certification
- Residential Efficiency Scorecard rating of 7+ stars (excluding the impact of solar)
- A Green Star Design & As Built score of 8 points or more
What they offer:
- 5.98% variable rate
How to qualify:
In order to qualify for an Eco Upgrade home loan, you must have done one of the following in the last 12 months:
- Completed 3 or more of these upgrades:
- Energy monitoring system
- Solar panels (minimum 3kW)
- Home battery (minimum 5kWh)
- Hot water heat pump or solar water system
- Window double glazing and/or low emissivity coatings
- Underfloor, wall and ceiling insulation
- Electric vehicle charging point
- Efficient air conditioning
- Efficient pool pump
- Residential Efficiency Scorecard:
- Improve efficiency rating by 1 star or more
What they offer:
- 5.98% variable rate
How to qualify:
There are two ways to qualify for Eco Plus:
- NatHERS rating of 7.5 stars or higher and solar panels (minimum 3kw) or
- Green Star Homes certification
What they offer:
- 5.88% variable rate
- 100% offset
- Extra repayments available
How to qualify:
- Your home needs to pass the current minimum environmental standards required by your relevant state or territory authority
- You need to provide evidence that your home has at least one feature from this list:
- Grey Water Treatment System
- Solar Power System (including PV)
- Wind Turbine
- Micro Hydro System
- Double-glazed windows (or better)
- You need to provide evidence that your home has at least two features from this list:
- Solar Hot Water
- Rain/Storm Water Tank
- 5 star+ Gas or Electric Heating
- External Awnings
What they offer:
- 7.20% variable interest rate
- No monthly service fee
- Unlimited advance payments and redraws
How to qualify:
- Your home must be less than 12 months old
- You must get a NatHERS certificate from an accredited assessor, showing a 7.0-star natHERS rating or higher
What they offer:
- Borrow up to $2 million
- Unlimited additional repayments
- 16% discount for the first 5 years
Talk to your mortgage broker to find you the best green home loan that fits your specific individual home loans.
Read more: Specialist mortgage lenders.
Pros And Cons Of Getting A Green Home Loan
The pros
- Green home loans are usually discounted, which can save you lots of money in the long run,
- Going green means that your house has a lower carbon footprint. For example, more efficient houses can emit up to 62% fewer greenhouse gases.
- Having a green home is not only good for the environment. It is also good for your pocket. An energy-efficient home can save you a sweet 66% in electricity usage.
- Green homes are designed to take advantage of natural things like sun and wind to make your home comfortable in any weather. This means you will enjoy living in your home with a lot of sunshine and good ventilation.
- There is less exposure to toxic materials in a green home, which can be very helpful in reducing respiratory illnesses.
- If you intend to sell your house down the road, then going green can increase the value of your home as more and more people are becoming climate-conscious when buying homes. According to a 2018 Energy Consumer Sentiment Survey, 60% of respondents said energy efficiency would be a factor when buying a home.
The cons
- Limited lenders. Although the list of lenders offering green home loans in Australia is growing, the list is still very small. This means you will have a limited pool of lenders to choose from. Talk to your mortgage broker to determine which lender works best for your situation.
- Green home loans usually have very strict lending criteria, which can make them difficult to get.
Bonus: What Is The NatHERS Rating, And How Does It Work?
One of the criteria for getting a green home loan is to have a NatHERS rating of 7 or higher. So, it is important to know what NatHERS is and how it works.
The Nationwide House Energy Rating Scheme (NatHERS) was introduced in 1993 and measures the energy efficiency of your home. It takes into account the amount of energy needed for heating and cooling your home. This is then used to give your home a rating between 0 and 10.
Note: NatHERS does not include water heating systems, lights and household appliances because these are replaced often.
According to the NatHERS website, your home’s rating depends on how well these factors suit the local climate:
- the layout of the home and orientation
- roof, walls, windows and floor construction methods and materials
- shading to the sun’s path and how well your home takes advantage of local breezes
What do the NatHERS ratings mean?
- A 0-star rating means the building shell does practically nothing to reduce the discomfort of hot or cold weather.
- A 6-star rating is a minimum standard in most states and territories. It indicates good, but not outstanding, thermal performance.
- A 10-star rated home may not need artificial cooling or heating to keep you comfortable.
Read more: 16 hidden costs of buying a home in Brisbane
Bonus: How To Achieve An Energy Rating Of 7 Stars
In order to achieve a high NatHERS rating, you have to design for your climate. Most Australian homes are usually too hot in summer or too cold in winter, which means they require large amounts of energy to make them comfortable.
The best way to improve a high NatHERS rating is to use a passive design for your house. A passive design uses the sun and wind to cool and heat your house naturally. You can create a passive design when building from scratch, or you can make some renovations to your existing house. The Australian government offers free designs for energy-efficient homes.
Here are some practical ways to improve your NatHERS rating:
- Glazing by the orientation of each room. For example, if you live in a hotter climate, North-facing rooms should have less glazing to prevent heat gain in Summer. But if you live in a cooler climate, North-facing windows should have more glazing to get passive heat gain.
- Prevent air leakage by putting weatherstrips and seals on windows and sliding doors.
- Make your interior room layout more efficient by grouping non-conditioned rooms like laundry and bathrooms close to each other.
- Change your roof colour. If you are in warmer places like Brisbane, a lighter colour for your room will be better. But a darker roof performs better in colder areas like Melbourne.
Frequently Asked Questions
A green home loan is a type of mortgage that offers special discounts or incentives for buying, building, or renovating an energy-efficient home. These loans typically require the property to meet certain environmental or energy efficiency standards.
Green home loans often have lower interest rates, higher loan-to-value ratios, and may offer larger loan amounts compared to regular home loans. However, they require the property to meet specific energy efficiency criteria.
Common criteria include having a 7-star or higher NatHERS rating, meeting specific energy efficiency standards, or having certain eco-friendly features like solar panels or rainwater tanks. Exact requirements vary by lender.
Some major lenders offering green home loans include Commonwealth Bank, Loans.com.au, Gateway Bank, Bank Australia, Regional Australia Bank, and Firstmac.
Benefits can include lower interest rates, potential energy bill savings, reduced carbon footprint, improved home comfort, and potentially increased property value.
Drawbacks may include stricter eligibility criteria, limited lender options, and potentially higher upfront costs to meet energy efficiency standards.
NatHERS (Nationwide House Energy Rating Scheme) is a star rating system that measures a home's energy efficiency on a scale of 0 to 10 stars. Most green home loans require a minimum 7-star rating.
You can improve your rating by using passive design principles, improving insulation, installing energy-efficient windows, and optimising the home's orientation and layout.
Some lenders offer green home loans for existing properties if they meet certain energy efficiency criteria or if you plan to make eco-friendly renovations.
Both fixed and variable rate options are available for green home loans, depending on the lender.
Yes, the Australian government offers various rebates and incentives for homeowners who want to improve their home's energy efficiency.
Some lenders offer specific green loans or top-up options for installing solar panels and other energy-efficient upgrades.
Minimum loan amounts vary by lender, but they typically start around $150,000 for full home loans, with smaller amounts available for green upgrades.
While many options are available nationwide, some specific programs or criteria may vary by state or territory.
You can apply directly through a participating lender or work with a mortgage broker who specialises in green home loans.
Applying For A Green Home Loan
If you are ready to go green for your home loan, our team at Hunter Galloway is here to help you. Unlike other mortgage brokers who are just one-person operations, we have an entire team of experts dedicated to helping make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
Note: all interest rates quoted on this page are current as at November 2024 and subject to change without notification
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