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Are you concerned about climate change and thinking of 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, we will share everything you need to know about getting a green home loan in Australia, and which banks provide the best loan products in this space.
So if you are wanting to reduce your carbon footprint, then you’ll love this guide. Let’s get started.
- What is a Green Home Loan?
- Green home loan vs regular loan
- How to qualify for a green home loan
- Best green home loans in Australia
- Pros and cons of buying a green home
- Bonus: What is the NatHERS rating, and how does it work?
- Bonus: How to achieve an energy rating of 7 stars
- Applying for a Green home loan
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
Green home loan vs regular loan
A green loan is only for homes that meet certain criteria that make them energy-efficient homes, 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
You will need to meet certain criteria in order to qualify for a green home loan. These criteria differ from lender to lender, but generally, you must meet one or more of the following criteria:
- The home must be owner-occupied
- 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.
- Passive House Certification.
- Green Star, Design & As-Built score of 8 points or more on the credit ’15 Greenhouse Gas Emissions.’
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 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 May 2022):
CommBank (CBA)
The Commonwealth Bank offers two types of green loans, one is for existing customers to ‘greenify’ their existing homes and is to buy or build an environmentally home.
CommBank Green Home Offer
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
- 250m2+ = 10kWe
What they offer:
- 1.99% Standard Variable Rate for Owner Occupiers making Principal and Interest repayments with a Wealth Package and at least a 20 per cent deposit
- Available to other eligible borrowers – interest rates available on application.
CommBank Green Loan
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 – 0.99%
- Loans up to $20,000
- No monthly fees
Loans.com.au – Green Home Loan
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:
- 1.88% discount variable rate
- Add an offset sub-account for 0.10%
- No monthly, annual or ongoing fees
More info here.
Gateway Bank’s Green Home Loans
Gateway Bank offers two types of green home loans:
Gateway Green Plus Home Loan
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 system for energy rating, 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
- 2.14% interest rate per annum
- No establishment fee
- 100% offset account
- Unlimited extra repayments and redraw facility
Gateway Green Home Loan
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 4 star or up to a maximum 6 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 or up to a maximum 6 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 0.25% discount from their standard premium package home loan
- 2.24% interest rate per annum
- No establishment fee
- 100% offset account
- Unlimited extra repayments and redraw facility
More info here.
Handypay Green Loan
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 5.79%
- Minimum loan amount of $2,001
- Maximum loan amount of $75,000
- No fees for early repayment or termination
Bank Australia – Clean Energy Home Loan
Bank Australia offers three different home loan products for green homes.
Eco Clean Energy Home Loan
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:
- 0.2% discount off the standard interest rates
- 2.25% variable rate
Eco Upgrade Clean Energy Home Loan
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:
- 0.2% discount off the standard interest rate
- 2.25% variable rate
- Eco Plus Clean Energy home loan
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:
- 0.3% discount off the standard interest rate
- 2.15% variable rate
Regional Australia Bank – Sustainable Home Loan
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:
- 2.79% variable interest rate
- Up to 8, 100% offset accounts
- Up to 95% LVR (With Lenders Mortgage Insurance)
- Unlimited advance payments and redraws
Firstmac – Green Offset Variable Home Loan
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
- 0.6% 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, then a lighter colour for your room will be better. But a darker roof performs better in colder areas like Melbourne.
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 subject to change.
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