Why Net Zero Homes Could Struggle With Financing

What is a net zero home? Basically, it’s a house – or other domestic habitation – where the day-to-day energy costs are minimal or even zero. There are more and more such homes being built as new technologies and new materials are developed. But – in some ways – our financial institutions are not keeping up with the innovations and you could struggle with financing.

Building a Net Zero Home

Currently, net zero homes cost more to build than traditional homes. They require more individual and targeted planning and some specific and specialist materials in order to work properly. These materials are becoming cheaper, and the planning expertise is becoming more widespread. However, it is a fact that net zero homes are costlier to build. They use techniques and materials such as extra insulation, geothermal heating and cooling, solar panels and passive solar design to reduce their reliance on, and consumption of, traditional energy sources.

This innovation means that most net zero homes are custom-built, or at least semi-customised, from the outset. The initial expense is higher, but over time, the owners begin to reap the rewards, both financial and environmental. Given the increasing cost of energy in the UK, Europe and the US, not to mention very real concerns over environmental impact, these homes are a long-term investment which can pay off and begin to save money in as little as 12 years.

Financing a Net Zero Home

Financial institutions, however, have been slow to catch on. This means that net zero homes can be difficult to obtain finance for, because so few appraisers and lenders have expertise in offsetting the future financial benefits with the higher costs involved in building or buying such a home. They look at the net zero buildings in the same way that they do conventional housing. Some lenders have realised the impact of a home being net zero and will adjust borrowing and valuation rates to reflect that. Without big monthly payments for electricity and gas, most household’s finances look considerably healthier.

Financing Net Zero Alterations

Even if you’re not considering building an entire house, the net zero effect can affect you. If you’re considering a new boiler replacement or installation you may be considering the energy consumption of your boiler. If your new heating system is going to reduce your energy bills then your new boiler financing should reflect that. Should you be planning to borrow money for home improvements, you should look for a lender that knows to take into consideration future energy savings.

Net zero homes are an investment in the future, both financial and environmental. Energy prices keep rising. More banks and lenders need to look at the effect on debt-to-income ratio that a home which cancels energy bills will have – or that home improvements which lower those bills will have.