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Green Loans for Home Owners

By: Garry Crystal - Updated: 27 Jun 2012 | comments*Discuss
Green Loans Home Energy Savings

A new green loans scheme by the government allows homeowners to borrow money in order to make their homes more energy efficient. The government claims that the savings on energy bills will actually pay for the loans.

The Government’s New Green Loans Scheme

Green loans form part of the government strategy to cut greenhouse gas emissions. The government strategy is designed so that carbon emissions will be cut by at least 29% by the year 2020. Not only will the new green loans scheme cut energy bills but it is also designed to actually create jobs. It is estimated that around 65,000 jobs will be created by the ‘green homes’ industry by the year 2020.

How the Green Loans Scheme Works

The green loans scheme is designed as a pay as you save (PAYS) scheme. This means that the instalments that are paid back should be lower than the savings made once the energy efficient products are installed in the home. For instance, installing solid wall insulation into a home could save around £380 per year. Over a number of years this saving alone should be enough to repay the loan. The green loans are designed to cut down on the actual upfront amount needed to install green products into the home.

How to Make a Home ‘Greener’

There are a number of green products that can be installed into a home to reduce energy bills and cut gas emissions. These can include solar panels, solid wall insulation, double glazing and loft insulation. The installation of roof mounted solar panels will cost around £10,000 and will take 10 years to repay. Installing these products will not only cut energy bills but should actually add to the value of the home. A number of building firms and supermarket retailers such as Tesco are already consulting the government on the scheme.

A Greener Home is Desirable to Buyers

According to government officials, green homes are more desirable to buyers. Potential house buyers will see the benefits in buying a home that has energy saving facilities; the energy bills will be lower. But not everyone agrees with this thinking. The green loan schemes are tied to the property not the person. This means that home buyers could find themselves repaying the annual charge on the scheme. One alternative would be that sellers pay off the balance of the green loan from the sale of the house.

The Warm Homes as Standard Scheme

The green loans actually form part of the Warmer Homes, Greener Homes scheme. One part of this scheme is to make ‘warm homes’ a standard for social housing. Social tenants will receive upgrades for free from energy companies. This will include smart meters that will save around £300 per year on energy costs. This is designed to allow those who need it most to receive minimum energy efficient standards on rented accommodation.

The Government Green Loan Strategy Objectives

The main objectives of the Warmer Home, Greener Home scheme include:

  • Six million homes to be insulated by 2011
  • Homes to have loft and cavity insulation by 2015
  • Seven million homes to have eco-upgrades by 2020
  • New green standards for rented accommodation
  • Around 65,000 jobs created through this scheme
  • Green finance will help homeowners to upgrade their homes
  • Cutting of gas emissions by 29% by the year 2020
  • Homeowners energy bills to be drastically reduced

Is the Green Loan Scheme a Good Option?

In terms of cutting down on carbon emissions and saving on energy bills the green loan scheme does seem viable. But the loans are actually another debt that has to be repaid. Some homeowners are actually viewing the green loans as more of a green tax and simply another foolish idea during a time when Britain is heavily in debt. The eco-house may be desirable to buyers but the taking on a previous occupants green loan debt might well put the buyer off. Not every homeowner is sold on the ‘green’ way of thinking, and there are many who are more than sceptical of this latest government plan.

There does seem to be a many plus points included in the new green loans scheme. But as with many government plans there can be drawbacks. According to the Royal Institution of Chartered Surveyors, solar panels would actually take between 50 and 100 years to recoup the cost in energy savings. If this is the case it may take many more years than expected before energy savings will cover the costs of buying a green loan.

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