Should You Get an Eco Technology Loan?

Do you have an older home?  If you do, you know all of the quirks an older home can have–newspapers stuffed into walls instead of the insulation we use today, old windows that let in drafts and are not energy efficient, sloped floors and crooked doors that let air in.  You know what I’m talking about. 

If you’re house isn’t that old, you still likely could find things that you’d like to change about it to make it more energy efficient.

You may drive down the highway and see houses with solar panels and wish that you, too, could install them and begin to live a more eco-friendly life.  You know that once the panels are installed, you’ll save money, just like you know if you insulate your house better and replace drafty old windows you’ll make not only a difference in the environment, but in your wallet.

The problem is that making energy efficient changes cost money upfront that you may not have.  But there is a solution you may not have heard about: eco technology loans.

What Is an Eco Technology Loan?

Simply put, eco technology loans are ones you can get specifically to make your home more energy efficient.

How It Works

There are companies that offer loans with competitive prices so you can finance your projects to make your home more energy efficient.  Because these companies can be a peer-to-peer lenders (meaning the money comes from other individuals, not an institution), they can offer a competitive interest rate.

Often these types of loans offer the borrower the chance to pay off the loan early with no penalties.

What Countries Offer Eco Technology Loans

Many developed countries offer these types of eco technology loans.  You can simply search the Internet for “loans for solar panels” to see if your country is one of them.  You can easily find many companies in Canada, the United States and England that over these types of loans.  Some countries may also offer a rebate or a tax credit for making your home more energy efficient.

Why Get an Eco Technology Loan?

Take out a loan to make your home more energy efficient?  Is that financially responsible?  While many people may view installing solar panels or more insulation a luxury or something “extra” to do if you have the money available, the truth is, doing so can save you a great deal of money.  Replacing all the windows in your home can be very expensive and may run you $20,000 or more.

Yet, making eco friendly changes to your home can result in immediate savings.  You may be able to recoup your initial investment, depending on how large, in just four to ten years.  Then, you’ll continue to  benefit for years beyond that.

We’d say that is a worthwhile investment, even one worth financing to get it done.

ROI of Home Energy Upgrades

Whenever you open a newspaper, you’ll likely find ads for home improvements such as new windows, insulation, and furnaces. These ads regularly promise energy savings that will allow you to recoup your investment in a short period of time, often something like “5-7 years” or maybe even less. But unless your utility costs are well above average, you might question the credibility of these claims (“how can $10,000 worth of windows pay for themselves in 7 years if my utility costs are only $1500 per year?”).

The truth is, most of the advertised payback periods are based on upgrading an extremely inefficient home with very high utility costs. This post will evaluate the savings possible in more typical situations.

Furnaces

According to Natural Resources Canada, space heating accounts for about 60% of the average home’s energy costs, so it makes sense to focus on this when making energy improvements. You’re probably using a gas furnace to heat your home right now. If it was made before 1995, it’s probably only about 65% efficient. If it was made between 1995 and 2009, it’s probably about 80% efficient. By comparison, new furnaces are 90-98% efficient, so you’ll save 18-34% on heating costs by upgrading. But new furnace costs are in the $5000 range, and natural gas prices are at a 10-year low. So you’ll have to evaluate how much you spend on space heating (it usually accounts for most of your gas bill). If you have a larger home with high heating costs, the payback periods can still be short (7 years or less) if you have an old, inefficient furnace. But if you have a smaller, better insulated home, the payback periods can be long (20 years or so, assuming gas prices remain low).

Heat Pumps

A heat pump is basically an air conditioner that can run in reverse, and can thus provide both heating and cooling. Since they only move heat from one location to another, rather than creating heat, they can operate at efficiencies of over 300%. Unfortunately, electricity costs have been rising in many parts of Canada over the past few years, whereas natural gas prices are at a 10+ year low. Since electricity is now relatively expensive, this means the savings on heating costs over newer furnaces can be marginal. So the main reason to install a heat pump would be for the air conditioning. However, if natural gas prices rise again, heat pumps will once again provide large savings on utilities. Continue reading ROI of Home Energy Upgrades