Green Home Loan Interest Rates

What is a Green Home Loan?

A green home loan is like a regular home loan, except it features a discounted interest rate for properties that meet certain energy efficiency standards. There are several lenders in Australia that offer green home loans with these discounted rates, but eligibility criteria can vary.

The residential sector makes up more than a quarter of Australia’s emissions, so there’s plenty of reason to be mindful of your property’s output anyway, but green home loans are an additional financial incentive to choose an energy efficient home.

Each lender has its own criteria borrowers have to meet in order to be eligible for a green home loan. It’s best to check directly with the lender to find out its eligibility criteria.

Generally speaking, to be eligible for a green home loan your new or existing home might need to have certain features, which could include (but not limited to):

• Solar panels

• Insulation

• Double glazing

• Solar hot water systems

• Water tanks

• Energy storage system

Your home generally also has to meet or exceed a seven star NatHERS rating to be eligible for a green home loan.

Which lenders offer Green Home Loans

A growing number of lenders in Australia are now offering green home loans. Below are some of the lenders in Australia who offer green home loans at the time of writing.

• Bank Australia: The customer-owned bank offers a Clean Energy Home Loan in partnership with the Clean Energy Finance Corporation (CEFC). The Clean Energy Home Loan is available on the Premium Package Home Loan for new and existing customers (including refinancers).

• Commonwealth Bank: Existing CommBank customers with an eligible home loan or investment home loan can use the CommBank Green Loan to buy and install renewable technology for their homes.

• Firstmac: The non-bank lender offers a Green Basic Home Loan on homes built within the previous twelve months that meet or exceed the seven-star energy rating under the Nationwide House Energy Rating Scheme (NatHERS). 

• loans.com.au: Firstmac’s retail brand loans.com.au also offers a discounted Green Home Loan for homes less than 12 months old that have a NatHERS rating of seven stars or more. It also offers a Solar Home Loan featuring an interest rate discount for homes that have solar panels.

• Regional Australia Bank: The Sustainable Home Loan is for owner occupiers who want to invest in environmentally friendly and sustainable features for their new home, or add them to their existing home.

• Gateway Bank: The mutual bank’s Green Home Loan offers a discounted variable rate on properties with a (NatHERS) rating of 7 stars or higher.

• NAB: If you’re buying or refinancing a property that has a NatHERS rating of seven starts or higher, NAB offer lower variable rates, as well as discounts on Lenders Mortgage Insurance (LMI).

Interest rates on Green Home Loans

In general, lenders will offer lower interest rates on green home loan products. This could be a minor discount, or some of the cheapest rates on the market.

There’s a couple of reasons why lenders might do this. First of all, many banks and lenders like to make pledges towards a sustainable future. Energy efficient homes contribute to reduced carbon emissions and conserve natural resources, so are one of the principle ways banks can demonstrate their commitment to environmental issues.

Secondly, some lenders might also consider owner-occupied energy efficient home loans to be lower risk. Electricity and gas costs can be substantial, and are often susceptible to upward pressure from domestic inflation or geopolitical instability. Energy bills tend to be one of the largest household expenses, and can be a contributing factor for households who are forced to default on their loan. Homeowners will typically make significant savings on their energy costs with an energy efficient home, so lenders might prefer to give out these loans because there is less chance the household's expenses become overwhelming, forcing the lender to repossess the property.

NatHERS

When applying for a green home loan, many lenders will require a Nationwide House Energy Rating Scheme (NatHERS) Accredited Assessor to give the property a rating of 7 stars or higher

NatHERS is a star rating system out of 10 which rates the design of a home based on its energy efficiency. The rating system is judged on things like the layout of the home, construction methods and materials used, plus how much heating (or cooling) the occupants may require to live comfortably throughout the year.

To calculate a NatHERS rating, the assessor will use software that models expected indoor temperatures based on data specific to that property, including the design and construction of the home, local climate, and common patterns of household use. The assessor then enters the data into the software, which develops a simulation model of the house or apartment, including:

• size and function of rooms

• size and specification of openings

• building materials/windows/products

• type of construction

• dwelling orientation

• location

The software then models how much heating or cooling will be necessary during the year by simulating how the local climate heats and cools the house during the day and night. As soon as the temperate inside falls outside of a ‘comfortable’ range, the software models the need for heating and cooling based on the assumption the occupants in the house will open or close windows and blinds/awnings before resorting to using heating or cooling.

The total estimated annual heating/cooling requirements are then converted to a star rating out of 10.

It’s important to note the NatHERS rating does not take into account things like household appliances, hot water systems or lights because these are usually replaced many times over the course of the building’s lifetime.

Green Home Loan Pros and Cons