How do green home loans work?

As more Australians look for ways to minimise their carbon footprint, a growing number of lenders are backing them with ‘green’ loans.

Green loans, also known as sustainable loans, are loan products that can be used to finance the purchase of energy-efficient homes, the construction of energy-efficient homes and green renovations. They can also be used for things like:

• Battery storage.
• Double glazing.
• Electric vehicles and EV charging stations.
• Energy-efficient air conditioning, lighting and white goods.
• Grey water treatment systems. 
• Home ventilation systems.
• Insulation.
• Inverters.
• Solar panels and hot water systems.

Green home loans vs regular mortgages

The application process for a green home loan is similar to that for a regular mortgage. The key difference, though, is that green home loans may offer lower interest rates, lower fees and more flexible borrowing conditions.

That's why, as part of the application process, you'll need to explain what you're planning to use the loan for and confirm that your project meets the lender's environmental guidelines.

The benefits of green homes

Making your home more environmentally friendly carries several benefits, the most obvious ones being lower emissions, lower running costs and (generally) higher liveability.

But there are other benefits, which Domain explored in its Sustainability in Property 2024 report.

When Domain compared green property listings with non-green listings, Domain found that green homes:

• Attracted more views
• Sold faster
• Sold for higher prices

So making your home more energy-efficient is also likely to increase its resale value.