You can get very low cost lending if you are borrowing for this purpose, as outlined below:
Most major banks have a product which will fit as least one of the above options, but in many cases it's both.
These loans can range from interest free for up to 5 years, to a floating/variable interest rate of around 8% for up to 10 years.
To take advantage of these home loan top-ups, you must have your mortgage with the bank you're requesting the funds for. If you are not with the proposed bank, you can move your mortgage to them - but it's worth considering the overall cost/benefit of this - which we can help you with.
If you're wondering which option may be best for you - get in touch.
In the meanwhile, below is a summary of the banks options and criteria, along with pros & cons:
Westpac’s "Warm Up" loan top-up is interest free and you can borrow up to $50,000 over 5 years.
If you are unable to pay off the loan within the 5-year period, a default interest rate of 5% will apply to the outstanding balance.
What it can be used for:
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With the ANZ "Good Energy" home loan top-up you can borrow up to $80,000 to make your home more energy efficient, or buy an electric or hybrid vehicle.
The loan has an interest rate of 1% and is repaid over a term of 3 years.
If you have not fully paid off the loan within this 3-year period, you can choose to refix at the bank’s fixed or floating interest rates.
What it can be used for:
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Very similar to ANZ’s offering, the Green Home Loan top-up from BNZ allows you to borrow up to $80,000 over a 3-year term. It also has an interest rate of 1%.
If you cannot pay off the loan within 3 years, the loan can either be refixed to a higher rate or the bank’s floating home loan rate will apply.
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Kiwibank’s Sustainable Energy Loan top-up can be used to purchase a wider range of sustainable energy systems than some of its competitors. However, it cannot be used to buy home heating or insulation.
The amount you can borrow will depend on how much of your home loan you’ve already paid off, the value of your home, and how much Kiwibank believes you can comfortably repay. The minimum loan term is 7 years while the maximum is 10.
Unlike the other banks, Kiwibank does not offer a more favourable interest rate than its regular home loan rates and its standard variable rate home loan rate (8.50% at the time of writing in July 2023) applies.
However, if you borrow more than $5,000, Kiwibank will contribute up to $2,000 to the cost of your sustainable energy system over a 4-year period ($800 at the end of the first year and then $400 at the end of each of the following three).
What the loan can be used for:
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ASB’s Better Homes top-up loan offers up to $80,000 at an interest rate of 1% fixed for a 3-year period for the purchase of better heating, insulation, solar energy, and more.
If you are not able to pay off the loan within this 3-year period, ASB’s variable rate applies.
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If you're considering a home-loan top-up and want to borrow funds for a sustainable purpose such as what's mentioned above, get in touch with us today.