Planning to sell your home soon? Think twice about a Green Deal loan

Posted: 25/01/2013

The Department of Energy & Climate Change have created their latest energy saving scheme, the Green Deal where homeowners can take out a loan to upgrade the energy efficiency of their homes and save money. This could be through various methods for instance, loft insulation, triple glazed windows or boiler upgrades and the cost of these upgrades is to be covered by the saving made on the customers energy bill.

This sounds pretty tempting doesn’t it? Especially with the Government currently offering £1,000 cash back to households that sign up to the Green Deal however, up to now only two households have put pen to paper and signed up. Are you wondering why? Well, the truth is, is if you’re planning to sell your home within the next 10 years or so, you may find this a very difficult task.

The Green Deal loan is not attached to the householders, it is attached to the property therefore, anyone who was to purchase a property that has a Green Deal loan attached to it would have to continue to pay off the loan via the savings on their electricity bill. Considering there are only 3 days to go until the official launch of the Green Deal, the Department of Energy & Climate Change have not published any calculations or projections to show the general public how much they can save and how long it would take to pay off a Green Deal loan depending on what energy efficiency measures you adopt.

Critics have scrutinised the main objective of the Green Deal which is to save homeowners money on their energy bills however, it has been suggested that many homes across Britain are under heated anyway therefore, insulation and other energy efficiency measure may not result in considerable savings. This is because it would take the same amount of energy to heat up a house up but the result is that the house would be warmer. This sounds positive until you realise that the savings made on your energy bill is supposed to pay off the Green Deal loan.

Another problem that has been highlighted is the upfront cost of an energy assessment which is mandatory before you can secure a Green Deal loan. An energy assessment involves a qualified energy assessor visiting your home and finding out what type of energy efficiency measures would be best suited for your property. If you would like to find a Green Deal energy assessor in England and Wales you can call the Energy Saving Advice Service on 0300 123 1234 and for Scotland you can call 0800 512012 and you will be directed to your local Energy Saving Scotland advice centre.

Now, you may be thinking, what about the interest rates? Well, the Government have not yet been agreed with the installers and providers the amount of interest to be charged however the Department of Energy & Climate Change have estimated the interest rates will be around 6% - 7%. Base these figures on a £5,000 loan with the higher interest rate of 7%, householders would have to pay back over double the amount they borrowed over 25 years at £10,600 and would therefore need a saving of £425 a year on their energy bills to afford the annual repayments.

However, some homeowners may be entitled to discounted or free measures for instance, if they live in older properties or the homeowners are on benefits or low incomes. To find out if you qualify for this, you can contact the Energy Savings Trust on 0300 123 1234 or visit the energysavingtrust.org.uk.

My last question to you is, would you take out a Green Deal loan on your property?

Amanda McGovern, Pali Ltd
www.paliltd.com

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