How to take a green approach to your finances
Doing your part for the environment could save you thousands of dollars on your loan or mortgage and cost your insurance a few dollars, while investing in “green” businesses could pay you big profits – if you invest. judiciously.
Of course, financial gain may not be your motivation for reducing your carbon footprint or investing in green initiatives – however, it’s always worth taking any chance to put money back in your pocket and a loan or investment. “Green” may well give you that opportunity.
However, don’t let your enthusiasm for buying a financial product or green investment blind you to its weaknesses – you might be better off elsewhere. So what types of “green” products are currently offered by financial institutions – and is there a point in adopting them?
1 Green mortgages
There are big savings to be had if you qualify for a green mortgage.
For example, you would save almost € 3,000 in the first five years of your mortgage if you qualified for a green mortgage with AIB – if you are a first-time buyer, get a mortgage of € 300,000 over 30 years and borrow over 80% of the value of your home. There could be more savings after those five years – if low cost green mortgages are still available and you are entitled to them.
AIB, Haven (a subsidiary of AIB) and Bank of Ireland (BoI) offer green mortgages to those who buy or own energy efficient homes, and because these mortgages are discounted, they are cheaper than standard home loans from lenders.
The interest rate on AIB’s five-year fixed-rate green mortgage ranges from 2.1% to 2.45%, depending on the loan-to-value ratio (LTV – the percentage of the purchase price of the house). borrowed).
The Haven Green Mortgage (the cheapest fixed rate mortgage available from the lender) is a four year fixed rate home loan with an interest rate of 2.15 pc regardless of the LTV.
With the BoI Green Mortgage, you get a 0.3% discount on the lender’s standard one, two, three, five, and 10-year fixed mortgage interest rates. This 0.3 pc discount is also available on its four- and seven-year fixed-rate large-value mortgages (where € 300,000 or more is borrowed).
Ulster Bank also has a green mortgage although it is in the process of pulling out of Ireland and is no longer accepting mortgage applications from new customers.
You can take out a green mortgage from AIB, Haven or Bank of Ireland if you buy or build a house with a Building Energy Rating (BER – a measure of the energy efficiency of a house) of B3 or better. A valid BER certificate must be provided to your lender to prove that you are eligible for a green mortgage.
So far, green mortgages are only available to those who take out fixed rate mortgages. However, this has its drawbacks – you risk losing a lender’s repayment offer if you get a fixed rate mortgage. For example, you cannot get the $ 5,000 repayment offer from Haven if you use the lender’s green four-year fixed rate. Likewise, you cannot take advantage of BoI’s 3pc repayment offer if you get a high value fixed rate mortgage.
You may be eligible for a green rate if you top up your mortgage to make your home more energy efficient. The AIB Green Mortgage, for example, is available to those who supplement their home loan for this purpose – although you can only apply for the Green Rate once your home has hit the correct BER rate.
Use caution when paying off your mortgage in an effort to improve your home: If your financial situation changes in the future and you find yourself struggling to pay off the highest mortgage, you could lose your home. While the interest rate on a top-up mortgage can be much lower than the interest rate on a personal loan, you will increase the total amount of interest you will pay on your mortgage if you top it up. Plus, it’s generally better to pay off a home improvement loan over about five years rather than paying it off over 10 years or more (as it might be if you top up your mortgage).
2 Green loans
You could save thousands of dollars in interest by taking out a green loan – rather than a more expensive standard loan – to finance the cost of renovating your home. Green loans will generally be cheaper than other loans offered by a lender.
Some of the cheapest “green” home improvement loans are available from credit unions that are part of the CU Greener Homes program. Under this program, you could borrow at an interest rate of 4.9% from your credit union if your home improvements raise your home’s energy rating to A (the best energy rating you can have) .
AIB, BoI and An Post Money also offer green loans. An Post’s green home improvement loan interest rate is between 4.9% and 12.9%, depending on the amount borrowed.
The interest rate on AIB’s green personal loan is 6.25 pc; the interest rate on the BoI green home improvement loan is 6.5 pc.
To qualify for a green loan, you must use the borrowed money to reduce your carbon footprint. For example, to qualify for an AIB Green Personal Loan, you must devote at least 50% of your loan to a green initiative such as solar panels, a boiler upgrade, or attic insulation.
You must provide your lender with proof that a green renovation is in progress. With BoI, it could be a detailed quote or an invoice from a builder for an energy efficiency upgrade. To be eligible for the An Post Home Renovation Loan, you must obtain an energy efficiency grant from the Sustainable Energy Authority of Ireland (SEAI).
3 Green car credits
Some of the cheapest green auto loans – which are offered to those who buy electric or hybrid cars – are available from credit unions. For example, Naomh Breandan Credit Union in Loughrea, Galway charges 3.99% interest on its green auto loans. This rate – which is much cheaper than the 7.2 pc interest rate charged on standard auto loans from credit unions – is for hybrid or electric cars.
Savvi Credit Union in Dublin offers a green car loan rate of 5.64pc to members who purchase an electric or hybrid car – much cheaper than its standard car loan rate of 8.29pc.
Although An Post also offers “green” car loans to those who borrow € 20,000 or more to buy an electric car, with an interest rate of between 8pc and 14pc (depending on the amount borrowed), these loans are more more expensive than some of the other auto loans available in the market.
To get a green car loan, you need to provide your lender with proof that you are purchasing an electric or hybrid car. With the green car loan from Savvi Credit Union for example, you must provide a copy of the car registration certificate within four weeks of withdrawing the loan.
Don’t assume that a “green” loan is cheaper than loans available elsewhere. Before committing to a loan, check the cost of personal loans available from other lenders, even if these lenders do not specifically offer green loans. Avant Money, for example, offers some of the cheapest standard personal loans on the market, with interest rates starting at 6.1 pc. St Raphael’s Garda Credit Union charges 5.06 pc interest on its standard auto loans, which is cheaper than An Post Money’s green auto loans.
4 Insurance discounts
Your insurer may offer you a discount on home insurance if you have energy efficient home insurance or discount auto insurance if you have an electric car. FBD, for example, offers a 20pc discount on new home insurance policies if your home has a BER of B3 or better.
However, not all insurers offer green discounts. Also note that an insurer that does not offer a green discount could still be cheaper than another.
5 Green investments
Record amounts have been invested in green and environmental, social and governance (ESG) investments in recent years – and given recent commitments made at the C0P26 summit, this trend is expected to continue.
ESG investments focus on companies that pursue good social, environmental and governance programs. You could make money from ESG investments.
“What you tend to find is that companies that fit a good social and government program and a good environmental program into their culture tend to be very well run companies,” said Brian O’Reilly, manager. of market strategy at Mediolanum Asset Management. “In emerging markets where there is generally less regulation, companies that rank high in ESG terms tend to outperform steadily. We consider ESG to be a quality control of a company.
When green and ESG investments started to emerge, it was believed that there was a cost to investing in them, according to Tara Doyle, a partner of Matheson who is also chair of one of the Irish Funds Industry Association working groups. on the ESG. However, this vision is changing. “When you look at the evolution of the market and ESG, if you invest in a sustainable company, that [likely] be a better investment in the long run because the business will likely still be around in the long run – as opposed to a business that might have more in the short run [non-ESG] goals. “
As with any investment, do your homework and don’t get caught up in fads.
Making the wrong investment choice could cost you all of your money.