Navigating the green home buying process

You may be doing your best to recycle or are considering buying an electric vehicle, but have you thought about the benefits of buying or building an eco-friendly home?

Governments around the world are encouraging the creation of sustainable homes through regulation, incentives, and special funding for the adoption of eco-friendly technologies in new and existing homes.

In Australia, there are a range of programs homeowners and potential homeowners can access, and they can save you a considerable sum in the long run.

What is a green home?

First up, it’s useful to understand what a ‘green’ home actually is. There are a few markers, but a generally accepted definition is a home that is ‘environmentally sustainable’.

This commonly means a high energy-efficiency rating and the incorporation of design and technologies to reduce the home's environmental footprint, such as solar panels and water-efficiency measures.

Australia has developed a Nationwide House Energy Rating Scheme, known as NatHERS, to measure a home’s environmental sustainability. Under the NatHERS system, a home is considered ‘green’ if it has a rating of seven or more stars (out of a possible 10).

All newly built homes in Australia are required to meet this benchmark as part of the National Construction Code (NCC). This is assessed on the home’s energy-efficiency rating based on factors such as insulation, window glazing, orientation, and appliances.

But that is the baseline. You might opt to buy or build an off-grid, fully insulated, high-tech home designed for near-zero environmental impact. With the right choices, your home could not only reduce your footprint but also set a new standard for sustainable living.

What to look for in an eco-friendly home?

If you’re in the market for a sustainable home, there are several features to keep front of mind. These include:

• Proximity to amenities
  Location is everything in property and is also key to an eco-friendly home. If you can walk, ride your bike, or catch public transport to work, schools, shops, and other amenities, you are already ticking a key sustainability box.

• Orientation and design features
  It’s estimated proper building orientation and design can save homeowners anywhere from 10% to 30% on their energy costs, depending on the climate zone they live in. Look to build or purchase where living areas are north facing to make best use of natural light. If you’re building or planning to renovate an existing home, window placement, natural ventilation, eaves, and overhangs can save considerably on energy costs.

• Materials and construction
  If you’re building or planning to renovate, choose sustainable products such as bamboo flooring, reclaimed wood, and recycled steel. Choosing locally sourced products can also reduce freight costs and related carbon emissions.

• Energy efficient fixtures and fittings
  Be on the lookout for the latest technologies that can set you up for significant savings on energy and utility bills. These include the obvious ones such as solar panels, rainwater reticulation systems, and LED lighting, but also programmable thermostats, motion-sensors that activate and turn off services automatically, and energy-monitoring systems that give you control over your energy use.

• Outdoor spaces
  Gardens and yards can contribute significantly to sustainability. Well-placed native trees can provide shade to naturally cool a property as well as habitat for birds and local species. Native plants suited to the climate should require less watering and maintenance. Space for a veggie garden and composting facilities can also reduce carbon footprints and contribute to sustainable living.

How can I make my home a ‘green home’?

If you already own a home, or are considering purchasing an established one, there are many things you can do to make it more sustainable. These range from major renovations to relatively straightforward upgrades and installations to achieve better energy efficiency. You might consider installing or upgrading:

• Insulation

• Double-glazed windows

• Solar panels

• Solar battery storage systems

• Solar pool heating

• Ceiling fans

• LED lighting

• Energy-efficient appliances (check their star ratings)

• Real-time energy monitoring systems

• Water-efficient fixture and fittings

• Rainwater harvesting or greywater treatment systems

The good news is governments at all levels are often willing to incentivise and subsidise Australians who build or upgrade homes to be more energy efficient.

What are green home loans?

There's a wide range of green home loans on the market. They typically feature considerably discounted interest rates as many are subsidised through the federal government’s Clean Energy Finance Corporation, which operates much like a ‘green bank’ to disperse funds through existing lenders.

Green home loans can typically be used fund the construction of environmentally friendly homes that meet certain benchmarks. They’re also generally available to owners of existing homes looking to finance energy-efficient upgrades.

Find some of the most competitive green home loans currently on the market below:

Important Information and Comparison Rate Warning

Why should I build or buy a green home?

The Sustainability in Property report, released by Domain in 2024, shows Australians are increasingly motivated to buy and invest in sustainable home features.

It found half of all Australian houses and one-third of units have green features, with the proportion of green homes rising over time, although this was more prominent in houses over units.

The report said solar panels continue to be the “volume” driver of sustainability features in homes, featuring in 43% of houses sold, with increased demand attributed to public education on the long-term energy cost savings associated with solar panels.

It also found green features attract a “price premium” on the market, driving 16.7% greater buyer interest and selling 4% quicker than homes without green features.

No matter where you stand on the greenie spectrum, there's money to be saved – and potentially made – through building or owning a sustainable and energy-efficient home.

How much can I save with a green home?

The Green Building Council of Australia (GBCA) says living in a certified ‘green star’ home can typically reduce energy consumption by 56% to 60%. This equates to energy bill savings of $90 to $140 a month.

It says these savings can help homeowners pay off their home loan faster, estimating it can save up to $115,000 in interest costs on an average-sized home (depend on the home’s geographical location).

While building a home that meets its ‘green star’ rating will typically cost more – adding around $38 to $84 a month to mortgage repayments, even on a green home loan rate – the long-term financial benefits far outweigh the initial upfront costs.

A certified ‘green star’ home is also well-placed to have higher resale value compared to other standard homes in a similar location down the track.

Is it hard to qualify for a green home loan?

Each lender offering green home loans will have its own requirements, but standard eligibility criteria generally includes one or more of the following:

• Owning or building a home with a NatHERS rating of seven stars or higher (this is the minimum required for new builds)

• Incorporating specific energy-efficient features like passive design standards, sustainable building materials, solar panels, double-glazed windows, and high-performance insulation

• For renovations or retrofits on existing homes, specific energy-efficient upgrades may be required. These differ according to individual lenders.

How do green home loans compare to standard home loans?

As with many financial products, green home loans have their pros and cons. You’ll need to weigh them up according to your project, circumstances, and what you’re looking for in a loan. Here are some things to consider:

Green home loan pros

• Lower interest rates
  It’s hard to go past this advantage. Green home loans are generally subsidised by the Clean Energy Finance Corporation and typically have considerably lower interest rates than a standard home or construction loan.

• No or low fees
  Many lenders also waive or reduce fees on their green home loan products.

• May allow for higher loan-to-value ratio (LVR)
  Some lenders will allow green home loan borrowers to borrow a larger percentage of the property value than they would on a standard home loan.

• Discounted lenders mortgage insurance (LMI)
  Some green home loan lenders may also discount LMI, which is typically levied when a loan is more than 80% of a property’s value.

Green home loan cons

• Strict eligibility requirements
  Not every property will qualify for a green home loan as they can come with inflexible requirements.

• Limited lenders
  Not all lenders deal in green home loans, meaning there are fewer loan products to choose from.

• Limited features
  Some green loan lenders don’t offer features like offset accounts or a redraw facilities on green products.

Image by Victor via Unsplash