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Brokers who arrange loans for clients undertaking new residential home construction builds could save them on interest rates just by “asking the question” whether they qualify for a green loan.
Forster-based Unconditional Finance senior finance broker Joel Cross (pictured above) said that to date, not many customers had been asking about the availability of green loans on their construction builds.
However, Cross said because of recent changes to construction regulations, builders were often hitting the 7-star energy rating required to meet green home loan criteria through their standard inclusions.
“In some cases, all you need is to provide a 7-star ratings certificate, which a lot of people are getting; a lot of local councils already require people to get 7-stars to build a new home,” Cross said.
Green home loan products offer discounts on interest rates if a home meets certain energy efficiency criteria, typically 7-stars as measured by the Nationwide House Energy Rating Scheme (NatHERS).
While existing housing stock usually requires significant upgrades to meet a 7-star NatHERS rating, the National Construction Code (NCC) changes mean new builds often meet these benchmarks.
This puts borrowers building new homes within easy reach of a green loan and rate discount with their existing project, or by making minor changes to the planned construction of the property.
“It can be something as small as changing the colour of a roof, which could give you an extra boost on your NatHERS rating, which can then take a full per cent off your home loan,” Cross said.
For houses that fall under the 7-star rating, achieving green loan criteria and the associated energy efficiency can sometimes require more costly upgrades, such as the installation of rooftop solar.
Brokers are playing a key role in educating clients about green loan options because often borrowers lack awareness about these loan products and are not being told by their builders, said Cross.
“The new requirements have not long come into effect in a lot of local council spaces,” Cross said.
“Builders won’t talk to your clients about it too much. They are going to hit their minimum targets and the client may get the certificate sent to them along with a heap of other documents.
“But unless you are asking them, a lot of clients aren’t really going to know what it is, and that it can help them in any way – that’s what I’m finding.”
Cross said this was especially the case among investors where the products were not well popularised.
One of his recent mum-and-dad investor clients, who had a combined income between $170,000 and $200,000, could have potentially borrowed $50,000 more with a green loan product.
Additionally, the product would allow them to bring their rate down with a discount from 7.49% to 6.49%, which on a loan size of $700,000 loan, represented a significant saving, Cross said.
“It is about asking the question,” Cross said. “A lot of the time, it is then the client asking the builder about it because maybe they haven’t spoken about it. I’m not finding clients know too much about it.”
There may be changes in the market, with Cross saying some lenders may shift to a higher star rating.
However, he said a bit of research was all that was required for brokers to start doing green loans.
“A lot of these lenders have very useful product sheets on how to assess if someone is eligible. It's not overly difficult. If you look at the resources, it's set up to be able to offer it.”
Cross said he expected green loans to become more prominent in the market over the next few years.
“Obviously, the environment is such a big thing as well. So as these construction requirements are increased, it's sort of a case of you might as well jump on it.”
