Green Deal, Energy Saving Eco Loan, but is the Green Deal a good deal?
What is the Green Deal?
A loan to pay for green home improvements taken out against your home paid through energy bills. The Green Deal is a government backed scheme intended to provide loans for green home improvements. Home improvements might typically be loft insulation, cavity wall insulation, energy efficient boiler or appliance installation.
Is it economically worth wile?
The green deal is more expensive than a conventional loan, if you can self finance any work, this of course would be the most economic way to pay for it. Self Financing or conventional loans will allow you access to more contractors potentially meaning the work can be done for significantly less as company and tradesmen will incur costs to be part of the scheme. I for example as an existing heating engineer have been quoted £1,300 to do the course to allow my company to do green deal inspections. An architect or heating engineer could provide you with advice outside of the
scheme if you wished to have work done. For example as a typical heating and gas engineer I myself already hold qualifications in heating, energy efficiency, water and gas regulations (plus manufacturers courses).
Grants for this kind of work are also available for low income groups and for period homes so check these out first!
What are the benefits?
As the loan is not against yourself, but is against your property it may not affect your credit rating. Also if you might have issue getting a conventional personal loan then the deal may unlock investment you otherwise did not have access to. If you would just like energy bills and saving compartmentalised the green deal would be right for you, as the repayments are through the energy bills you would not have to be concerned with another bill or the loan.
How does it work?
A green deal inspector would visit your property to asses the viability of the green deal to your property. Any loan must meet the "golden rule" where by the cost of any improvements must be less than the saving made. An approved contractor must be selected to do the work.
Annual target for government has been set at 10,000 homes. Sadly the 3 Billion scheme is looking like a flop as after nearly six months just 2 homes for received green deal eco loans. Perhaps all that money, or a fraction of it could have been better spent simply informing home owners of the benefits of investing in their property.
Recent market research by Which? from an April (2013) survey indicates something of a stigma being attached to green deal debts on properties. 21% of property buyers would reconsider buying a property will a green deal loan attached to it, and a further 46% would want a green deal loan paid off before they would purchase the property. The paying off of a loan in full before selling may not be an option at the time with capital invested into buying another property.
It could be complicated;
As the loan is tied to the property no one yet knows how this might affect property prices. It may prove, as mentioned earlier, to be significantly more cost effective to have work done outside of the scheme.
Looks like a good scheme for housing associations, local government and large private landlords and companies. For private individual home owners and small investment landlords, self finance or a conventional loan would seem easier as well as significantly cheaper.
The purpose of this page is for summarised information (in this case with a bit of opinion) for home owners and landlords, not for technical guidance.