The trend toward green living has finally caught the attention of the banking industry.
Banks have watched as consumers have made greener choices in everything from washing detergent and light bulbs to high-efficiency furnaces and solar energy panels. With consumers interested in greening their lives, most of Canada’s major banks have seen the opportunity to offer “green mortgages,” which offer home buyers a discounted interest rate and other incentives to buy more environmentally sensitive houses or perform upgrades aimed at lowering their environmental footprint.
“We made the decision (to offer green mortgages) to respond to that market,” says Katie Archdekin, head of mortgage products for BMO. “We wanted to encourage customers to make positive change and positive choices for the environment. We’ve had great response.”
Consumers, especially first-time buyers, are increasingly looking to green home upgrades to help the environment and lower the carrying costs of owning a new home.
According to surveys conducted by Leger Marketing, while Canadians are interested in lessening their impact on the environment, the decision to buy a “green home” is really being driven by saving cash. More than 59 per cent of respondents cite financial savings as the main reason for making eco-friendly upgrades and purchases.
The results are not surprising, considering more than 51 per cent of survey respondents say utility costs are the biggest surprise financially when it comes to owning a home. Having new windows, doors and a high-efficiency furnace can go a long way to help make those carrying costs more palatable, according to Leger, which found 92 per cent of Canadian respondents recognize the cost advantages of energy efficient home upgrades.
It also found nearly half of all home buyers plan to make investments in energy efficient upgrades in the next year, especially with the anticipated extension of the federal government’s ecoENERGY Retrofit program. The program allows Canadians to write off a portion of their green home renovations on their taxes.
The green trend isn’t just infecting resale home buyers. According to an EnerQuality Green Building survey released in November 2009, more than 40 per cent of Ontario home buyers are willing to pay up to $10,000 more for a new “green” home, or a home that is Energy Star certified. That number is almost double the 22 per cent of home buyers who were willing to spend that amount of money in 2008.
Farhaneh Haque, regional manager of Mobile Mortgage Specialists at TD Canada Trust, says that with the additional money buyers are willing to spend on green homes and upgrades, many have been inquiring about discounts and incentives from the banks to help them.
“Environment has become increasingly popular. A lot of politicians are talking about it, the general public is talking about it, there are a lot of home renovation projects that you see around or on TV that are talking about it, major suppliers of home appliances are talking about it. It’s become very evident in the market,” says Haque. “It just made a lot of sense to have a product that supports our clients’ motivations. It encourages clients to seek out home renovations and take part, or participate, in environmental initiatives. It encourages green behaviour.”
While almost all of Canada’s big banks are offering green mortgages, the loans aren’t open to just anyone. Buyers must qualify for the green loan by proving that the house they are buying meets certain green energy standards, or that they will be completing certain green upgrades to the home shortly after moving in. Incentives offered by the banks vary. Some will provide rebates equal to the cost of a home energy audit, which is around $300, and then a cashback incentive that can be used for green upgrades. Others offer discounts to posted mortgage rates.
Eco mortgages
With so many different “green” mortgage offerings out there, wading through the offers can be a daunting task. Below is a list of a few of the more popular offerings on tap:
RBC Energy Saver Mortgage
— Receive a $300 rebate on a home energy audit
— Get a five-year, fixed mortgage with an annual interest rate of 4.34 per cent, more than one per cent lower than the regular posted five-year offering.
TD Canada Trust Green Mortgage
— Offers customers one per cent off the posted interest rate on a five-year, fixed-rate mortgage
— Customers also receive a cash rebate of up to one per cent of the amount of the mortgage when home buyers make Energy Star qualified appliance purchases and home upgrades or purchase CSA approved solar panels
— TD will also donate $100 to the TD Friends of the Environment Foundation charity for each Green Mortgage opened.
BMO Eco Smart Mortgage
— Offers buyers of green properties a 3.89-per-cent annual interest rate on their mortgage
— In order to qualify for the BMO Eco Smart Mortgage, the home must meet certain requirements as confirmed by a third party appraiser (or energy auditor) arranged by BMO.
Canada Mortgage and Housing Corp. (CMHC) incentive
— If a person uses CMHC insured financing to buy an energy-efficient home or purchases a house and makes energy-saving renovations to make it more energy efficient, a 10 per cent refund on the mortgage loan insurance premium may be available.
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