Unlock Savings: How Green Loans Can Transform Your Home’s Efficiency!
Meet Amanda Jelicich-Kane, a visionary on a mission! She’s set her sights on transforming her cozy home in inner-western Sydney into a model of eco-friendliness—all-electric and ready to tackle the challenges of climate change—within the next five years.
“Why? It’s simple: I want to make a positive impact on the environment, and saving money on electricity is just the icing on the cake,” she shares enthusiastically.
At 40, this enterprising business owner has recently settled her family of four into a charming 19th-century house in Balmain, where she poured her heart and resources into renovations to ensure the place is as cozy as it is sustainable.
An energy audit recently revealed that the next crucial step for Amanda is installing solar panels, but that hefty price tag of $12,000 felt a bit overwhelming.
While investing in energy-efficient upgrades can lead to significant savings on monthly utility bills, the initial costs of solar systems, batteries, and heat pumps can be intimidating. Luckily, Amanda has options at her fingertips!
This is Amanda’s stunning 19th-century abode in Balmain, a testament to her commitment to sustainable living. (Supplied: Amanda Jelicich-Kane)
Enter green finance! These innovative financial options often come with reduced interest rates specifically designed for energy-efficient upgrades.
Navigating this landscape can be daunting, but don’t worry—we’ll break down two key types of green finance that might just be the golden ticket for you.
What is a green loan?
Let’s get down to basics. A green loan is your ticket to financing a range of upgrades that enhance your home’s energy efficiency.
From insulation and double-glazing to cutting-edge solar panels, batteries, heat pumps, air-conditioning systems, or even EV chargers—the options are exciting and varied!
The government is rolling out a range of green loans through the Household Energy Upgrades Fund (HEUF) to help make these upgrades a reality.
Rooftop solar PV is just one of the many energy upgrades you can finance with a green loan. (Supplied: Victor)
Enter Grace Tam, the head of consumer finance at the Clean Energy Finance Corporation (CEFC), who’s at the forefront of this green finance revolution.
“We’re the green bank for the government,” she explains. Grace is collaborating with financial institutions to craft affordable loans through the HEUF, making it easier than ever for Australians to upgrade their homes from “glorified tents” to energy-efficient havens!
Currently, there are four loans available, including one from a lender named Plenti and additional options from Westpac and ING for those already in their mortgage fold. This December, they partnered with Bank Australia to expand their offerings.
Keep in mind, though, there are specific guidelines for these loans, including what they can be used for, the requirement to use accredited suppliers, and limits on borrowing amounts.
Tam notes that the private sector is also diving into the green finance pool, with banks, credit unions, and non-bank lenders competing to provide the best options.
“There are plenty of choices to explore,” she assures.
Grace Tam is leading the charge in making green loans accessible for everyone. (Supplied: CEFC)
Amanda discovered that her current bank offered a competitive product perfect for financing her solar panels.
“Since we were already with our bank, it made sense to apply there instead of looking elsewhere,” she remarks. “The interest rate was reasonable, and I figured the process would be straightforward.”
How do I apply for it?
Although Amanda was enticed by the appealing interest rates, she found the approval process to be quite a slog.
“Applying was more complicated than I expected. It felt like I was applying for a full home loan, despite only needing about $12,000. Halfway through, I thought, ‘Wow, this is more work than I anticipated.’”
“We had multiple discussions with someone from the bank to sort everything out. It seemed like a lot of effort for that amount of money.”
Amanda is focused on making her home as eco-friendly and comfortable as possible for her family. (Supplied: Amanda Jelicich-Kane)
Grace Tam understands that the intricate world of energy efficiency financing can feel overwhelming for many. That’s why her team is on a mission to simplify the process.
They’re collaborating on a “concierge” digital platform that takes the heavy lifting off the consumer’s shoulders.
“This platform will navigate the complexities for you. If you’re ready to move forward, they’ll assist you with financing options,” she elaborates.
With just your address, you’ll connect with accredited installers nearby to receive quotes on interest rates and borrowing costs.
“Everything will be taken care of for you. No need to spend hours Googling information—you’re not alone in this. We’re here to simplify your journey,” she assures.
With Boom, the consumer journey for energy upgrades is streamlined and efficient. (Supplied)
How much can you save?
Tam highlights the impressive savings available through green loans from the HEUF.
Plenti offers a staggering discount of up to 3.34% off standard loan rates, while Westpac’s rate stands at a competitive 4.49% compared to typical mortgages of 6% or 7%.
ING has a new offering with a rate of 3.74%, and the Bank Australia Clean Energy Home Loan starts with a variable rate of 5.38% for the first five years.
“These special rates show how financial institutions are stepping up to help their clients transition to greener living environments,” she asserts.
“The discounts are substantial when you compare these rates with standard mortgage rates, making eco-friendly upgrades a financially savvy choice.”
What about a green mortgage?
Green mortgages are designed to support borrowers in purchasing or retrofitting homes that are energy-efficient or produce fewer carbon emissions.
These loans come with enticing lower interest rates, provided borrowers meet certain criteria.
Tam has been instrumental in shaping the government’s efforts to create impactful green mortgages since 2018. The CEFC has partnered with various financial institutions to back these loans.
The concept of green mortgages began in the U.S. and is gaining traction worldwide. (Supplied: Carballo)
“We aim to reward individuals who invest in energy-efficient homes,” Tam elaborates.
“We require homes to meet or exceed current building codes and to incorporate clean energy technologies.”
These technologies can include solar panels, batteries, and hot water heat pumps, or be assessed through a recognized scorecard that rates your home’s energy efficiency from 0 to 10.
Tam notes that other banks and lenders are now following suit, offering similar products with or without the government’s backing.
“Some lenders prefer to test the waters before collaborating with us, while others are exploring their unique offerings,” she shares.
How much can I save with a green mortgage?
Marisa Hoffenberg, a green home loan expert, has spent years navigating this exciting landscape. She believes that, depending on individual circumstances, a green home loan often offers the most significant discounts.
“I have clients looking at a million-dollar mortgage over 30 years, saving over $100,000 just by choosing a green loan—now that’s impactful!”
Marisa Hoffenberg is a passionate advocate for sustainable living. (Supplied: Marisa Hoffenberg)
“I’m currently working with a client who has a fantastic rate compared to others, saving her $30,000 over the life of her green loan,” she adds.
While some clients are driven by their passion for sustainability and are willing to invest in building energy-efficient homes, others focus on the financial benefits.
“The significant discounts on home loans make it an easy choice for many,” she notes.
Hoffenberg acknowledges the hurdles in securing a green mortgage, describing her initial experience as “challenging.”
“But, like anything, there’s a learning curve. With time, you figure out how to navigate the process successfully. It’s about understanding the ins and outs to ensure your application is top-notch.”
Her commitment to sustainability fuels her passion for helping clients maximize their savings.
“It’s a rewarding area of finance to work in because everyone benefits, and I feel like I’m handing out candy to my clients!”
Why is the government supporting the loans?
The federal government has set an ambitious target: achieve net zero emissions by 2050 and transition to 82% renewable energy by 2030.
Residential buildings account for nearly a quarter of Australia’s overall energy consumption and over 10% of carbon emissions. Helping households electrify is crucial in reaching these goals.
Sadly, many Australian homes—particularly older ones—are subpar in energy efficiency.
“Many homes simply weren’t designed for our climate,” Tam explains.
“In fact, the building industry tends to refer to Australian homes as ‘glorified tents,’ with heating and cooling consuming a staggering 40% of energy usage.”
Grace Tam emphasizes the need for better energy efficiency in homes across Australia. (Supplied: CEFC)
While numerous government programs and incentives are already in place, a key strategy is to offer more affordable financing options.
“The goal of green home loans and personal loans is to support Australians in upgrading their homes for enhanced comfort and energy efficiency,” she states.
… and why are the banks doing it too?
According to Tam, the private sector also has a vested interest in promoting energy efficiency through green finance products. Member-owned banks recognize the importance of comfortable homes for their customers.
“They’re keen to offer green loans to their members,” she notes. Credit unions are particularly proactive in this regard.
Moreover, major banks have committed to net zero banking alliance targets, further spurring their involvement in this space.
“They have an obligation to act,” she emphasizes.
“Many banks are either already offering green financial products or are contemplating their options.”
Additionally, the booming green finance market offers significant opportunities for fundraising, and banks are eager to tap into this lucrative sector.
“Homeowners are also appealing customers because they typically have lower default rates on loans,” Tam adds.
“These are high-quality loans that financial institutions are eager to engage with. This surge in momentum within the market is fantastic news for consumers!”
“It’s high time we enhance our approach, creating a more streamlined consumer experience with better rates.”
Amanda, would you do it again?
Amanda is determined to combat climate change for the sake of her children. (Supplied: Amanda Jelicich-Kane)
Having already invested in retrofitting her home, Amanda is eager to tackle the cost of her solar system with smaller monthly payments instead of a large upfront sum.
“It’s another significant expense, and I’d prefer to keep our cash flow steady,” she explains. “A loan with manageable monthly repayments makes perfect sense.”
Next on Amanda’s agenda? Adding a battery and solar hot water system. While the savings on energy bills excite her, her true motivation runs deeper.
“It’s about being conscious of the environment and addressing climate change. I have young children to think about,” she reflects passionately.
