Top 7 Costly Mistakes to Avoid When Financing Home Energy Upgrades

2025 Guide | Discover the best way to finance your home energy upgrades. 

 

Upgrading your home’s energy efficiency is a great way to save money and upgrade your home, but financing these upgrades can sometimes bring unexpected costs.

Here’s how to avoid the most common mistakes people make when financing their energy upgrades—and save yourself some serious cash along the way.

Don’t let the paperwork scare you off. Read our “Ultimate guide to green loans” or get in touch with us to learn more about how green mortgages could help you save.

 

Mistake 1: Believing That 0% Interest Loans for Energy Upgrades Are Really Free

Here’s the deal: Interest-free" loans aren’t actually free. 

Traditional loans make money through interest. But interest-free financing companies (like Brighte) make their money by charging installers a hefty fee, which can be up to 40% of the loan amount. And since installers won’t absorb that fee, they’ll usually add it to your purchase price. The monthly repayment number might look good, but it doesn’t always tell the whole story.

A Quick Example

• Cash price for a 10kW solar system: $10,000
• Interest-free loan amount (with a 35% merchant fee): $13,500

So, instead of paying the cash price, you’re on the hook for an extra $3,500. And that’s not all—many interest-free loans tack on monthly account fees, late fees, and an establishment fee.

Unlike regular loans, interest-free loans usually offer zero benefits if you pay them off early. The fees are baked in upfront, so paying ahead won’t save you anything.

When you add it all up, the cost of these loans is often about the same as a personal loan. But they’re still a good option—as long as you’re going in with your eyes open.

Mistake 2: Not Comparing Green Loan Options for Energy Upgrades

There are more “green loan” options than ever, and they’re not all created equal.

 

A little comparison shopping can go a long way. Here’s a breakdown of your main choices:

• Green home loans – Give you a discount on your whole mortgage if your home meets certain energy efficiency criteria.
• Green secured personal loans – A separate loan but often at a lower rate. Banks like CommBank (3.99%) and Westpac (4.49%) offer these.
• Green unsecured payment plans or personal loans – Quick and easy to get but often more expensive.
• Interest-free loans (or buy-now-pay-later finance) – No interest, but watch out for those upfront fees.

The best option depends on your situation. Do you have a mortgage already? Does your bank offer green loans? How’s your credit score? And how fast do you need the money?

With so many choices, it’s easy to feel overwhelmed. But we’re here to help. Need help comparing options? Read our “Ultimate guide to green loans” or reach out to our team, and we’ll help you find the best fit.

 

Mistake 3: Ignoring Green Mortgage Loans Because They Seem Too Complicated

Green mortgages might seem like extra work, but they’re worth it for the savings. 

 

Even a small discount - say, 0.6% or 0.7% adds up! It is applied to your whole mortgage balance, not just the cost of your energy upgrades!

A Real-Life Example - Refinance to Bank Australia's Clean Energy Home Loan

On a $1,000,000 home loan, a 0.6% discount saves you around $6,000 a year. That’s real money back in your pocket, year after year, on top of what you’re already saving on your energy bills.

Check out a more detailed case study here, which explains how this home loan works, what eligibility criteria apply, and how to take the next steps.

A lot of people put green mortgages into the “too hard” category because of the paperwork. But we’re here to tell you not to. Green mortgages are a big part of what we do, and we can walk you through the whole process to help you lock in those savings.

Don’t let the paperwork scare you off. Read our “Ultimate guide to green loans” or get in touch with us to learn more about how green mortgages could help you save.

 

Mistake 4: Applying for Green Loans You Don’t Qualify For

Green loans often have eligibility requirements—both financial and related to your home’s energy efficiency.

 

To be eligible for a green loan, you must meet additional requirements compared to a regular loan. Generally, only certain products can be purchased with the loan, as we discuss in the “Ultimate guide to green loans”. Most green loans also require the product and installer you choose to meet minimum compliance standards. Some loans require your home to meet certain energy standards, like a specific NatHERS rating.

The basic financial Eligibility requirements apply, too. Although each lender's lending requirements may differ, many of the basics always stay the same. These can include income minimums, credit score requirements, and no changes to your budget that may impact your ability to pay back the green loan.

Nobody wants to do all the paperwork only to find out they’re ineligible after applying. To avoid that, take the time to review eligibility criteria, or better yet, let us handle it for you. We’ll make sure you’re on the right path from the start.

 

Mistake 5: Only Looking at Upfront Home Upgrade Costs Instead of Net Monthly Savings On Renewable Energy

Yes, financing a home energy upgrade costs money. But the great thing about these upgrades is they pay off by cutting down your energy bills.

 

If done right, financing an upgrade can actually make you cash-flow positive—meaning your monthly energy savings are higher than your loan payments.

Say you’re financing a $15,000 solar system that will save you about $1,200 a quarter (or $400 a month). Here’s how your monthly savings could look with different financing options:

 

Financing Type	Time Period	Monthly Payment	Monthly Net Savings
Green Home Loan	30 Years	$90	$310
Green Loan	10 Years	$152	$248
Payment Plan or Interest-Free Loan	7 Years	$200	$200

 

In all three cases, your energy savings more than cover your monthly loan costs. Financing can be a great way to make upgrades now without any upfront costs—and still end up with more money in your pocket each month.

Bottom line: Focus on net monthly savings rather than just upfront costs to make the best financial choice.

 

Start Your Free Home Assessment with 28Watt

 

Mistake 6: Letting Comparison Rates Mislead You on Green Mortgage Loans

Comparison rates are designed to show you the true cost of loans, but they’re not always reliable when it comes to green mortgage loans.

 

Some green home loan options—like those from Bank Australia or FirstMac—give you a discounted rate for the first five years. However, comparison rates calculate costs over the full 25 years, which can make them seem higher than they are for those initial discounted years.

The comparison rate is helpful for most loans with steady rates over time, but the number can be misleading for green mortgage loans with discounts. If your goal is to maximise short-term savings, focus on the actual discounted rate for those first years and plan to reassess when the discount period ends.

Suppose you get a 0.6% discount on your green home loan for the first five years. That’s substantial savings early on, even though the comparison rate might look high. After five years, you can consider refinancing options to keep your rate competitive.

Our advice: Compare the discounted rates for the short term and reassess or refinance once the discount ends. We can help you stay on top of rates and ensure you get the best deal.

 

Mistake 7: Missing Out on Extra Green Mortgage Savings by Doing More Home Energy Upgrades

Adding energy upgrades can make you eligible for even better mortgage savings.

 

Many green home loans reward homes that make multiple energy-efficient improvements. Installing solar panels is a great first step, but adding a battery or heat pump water system could make a big difference in your eligibility.

If you’re already considering upgrades, it may be worth looking into adding one or two more improvements. Not only will you save even more on energy costs, but you could also unlock bigger mortgage savings. Here’s a common path:

1. Start with solar panels: This often provides significant energy savings right away.
2. Add a battery or heat pump: This extra step could make you eligible for additional savings on your whole mortgage.
3. Improve energy efficiency: Add roof, wall or floor insulation or upgrade to double-glazed windows to improve thermal efficiency.

Smart tip: Consider one or two more upgrades to maximise your savings. Not only will you cut your energy costs, but you’ll also unlock valuable mortgage benefits.

Want to know more? Let’s discuss the best upgrades for your home. Reach out to us here.

 

Final Thoughts: Make Your Financing Work for You

 

Avoiding these common mistakes will help you secure the best value and maximise your savings on home energy upgrades. Financing can be complicated, but we’re here to simplify it. Contact us today to explore financing options tailored to your needs and start saving on your energy bills with confidence.