Home grants The Green Deal
The Green Deal has changed since it launched in 2013. Find out more about the changes, including whether it affects you if you have an existing Green Deal loan, and how you can pay for home improvements.
The Green Deal was a government scheme that provided loans to households to finance energy-efficient home improvements. The loan aimed to be paid back through the savings made on energy bills.
Although the government stopped supporting the Green Deal Finance Company in July 2015, you can still get a Green Deal loan from private companies that are registered to deliver these loans.
Read on to find out if you can pay a Green Deal loan back early and if Green Deal home improvements are under warranty. Plus what to do if you're selling your house and have a Green Deal, and how to switch energy supplier.
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Green Deal loans
The aim of the original Green Deal loan from the Green Deal Finance Company was to help spread payments for the upfront cost of energy-efficiency measures, such as solid wall insulation, boilers and double glazing.
It worked differently to a loan from a bank or other credit provider:
- You repaid the Green Deal loan through your electricity bill payments.
- The golden rule of the Green Deal was that loan repayments should never exceed the savings you made on your energy bills.
- However, this golden rule was not a guarantee that your bill savings matched your loan repayments. It was based on estimates of a typical household's energy usage and savings, and didn't take into account energy price rises.
- The loan is attached to the property you live in, not you. If you sell your home, it passes to the new owner.
- According to the Green Deal Finance Company, there was a one-off loan fee of £63 and a £20 annual finance charge for every loan that was taken out. Green Deal providers had the option of absorbing this cost, or passing it on to you.
- The Green Deal Finance Company loans had interest rates ranging from 7.9% APR to 10.3% APR. These loans lasted between 10 and 25 years.
The National Audit Office conducted an independent audit of the Green Deal scheme. Its findings were published in April 2016 and found that, during its life span, the Green Deal loan scheme only funded 1% of energy efficient measures installed through the Energy Company Obligation (ECO) and Green Loans scheme combined. It also found that the scheme saved only negligible amounts of CO2 and that households did not see these loans as an attractive proposition.
If you want a Green Deal loan now, then you need to find a registered Green Deal provider - search on the government's gov.uk website. Before you sign up to a loan, make sure you carefully research interest rates, as well as the terms and conditions of the loan, to make sure they suit your needs.
However, there are other ways you can finance home improvements, if you'd rather not get a Green Deal loan.
Alternatives to the Green Deal
If you're looking for financial support to make energy efficiency improvements to your home, a scheme called the Energy Company Obligation (ECO) provides support to low-income and vulnerable households for energy-efficiency home improvements.
There are other ways to pay for for improvements to your home to make it more energy efficient:
- Use your savings - you benefit from energy savings straight away as there are no repayments. Paying this way, however, may restrict you to cheaper home improvements.
- Use an unsecured loan - you may get a better interest rate than with one of the old Green Deal loans. But the loan is attached to you, not your property, and likely to be shorter term with higher repayments.
- Increase your mortgage - you may be able to get a better interest rate. However, there are no guarantees that the costs will be met by an equivalent increase in the value of your property.
- Use a credit card - you can take advantage of 0% interest deals and then transfer your balance over to a different credit card once the deal has expired, plus your installations will be covered by Section 75 of the Consumer Credit Act. Bear in mind that if you don't pay off your balance in full or transfer in time, interest rates can be steep.
If you have an existing loan from the Green Deal Finance Company
Paying off a Green Deal early
As a result of Which? campaigning, in May 2014 the Green Deal Finance Company announced it was removing any early repayment fees for its future Green Deal loans.
If you took out a Green Deal loan before this date, you can still pay it off early but may incur a fee. If you took out a Green Deal loan for less than £8,000 over less than 15 years, there are no early repayment charges.
For some providers, early repayment fees will be small when the Green Deal plan duration is 15 years or less and over £8,000 (up to a max of 1% of the loan). But for Green Deals of longer than 15 years, there is a maximum charge of £6 for each year left on the loan for every £1,000 you want to repay early.
Are Green Deal measures protected by warranties?
Most Green Deal measures came with a minimum five-year warranty and an extended 10-year guarantee to cover any building damage sustained as a result of the measures being installed. For solid wall insulation and cavity wall insulation, Green Deal providers must have guarantees for both the improvements and consequential building damage for 25 years.
Should you have a problem with a product after the warranty has expired, you will still be paying for a non-functioning product and will have no protection.
If you sell your home
The existence of the Green Deal must be disclosed to the buyer. If the buyer of your home does not feel comfortable taking over the Green Deal loan, they might want to renegotiate the terms of sale or you could consider repaying the Green Deal off early as part of your conveyance. However, we haven't yet come across any cases of buyers being put off - if this does happen to you, contact us at firstname.lastname@example.org.
If you have just moved into a house with a Green Deal attached to it, the person who pays the electricity bill pays the money back. So if you’re a tenant in a rented property, you’ll be paying back the costs - not the landlord. This is because the tenant can expect to benefit from lower energy costs.
If you move into a property with a Green Deal, the landlord or seller must show you a copy of the Energy Performance Certificate - this will explain what improvements have been made and how much you’ll need to repay.
In most cases you can still switch energy suppliers if you have taken out a Green Deal, as all of the larger providers (British Gas, EDF, Eon, Npower, Scottish Power and SSE) are part of the scheme. There are a handful of small energy suppliers that you can't switch to if you have a Green Deal, so check before switching.
If you are thinking of switching, find out who are the best and worst energy companies.