Borrowing for Home Energy Efficiency: Is It Worth It?
## Is Borrowing to Boost your Home’s energy Efficiency Worth It?
The rising cost of energy is hitting households hard. But what if you could significantly reduce your bills, increase the comfort of your home, *and* add value to your property? Home retrofitting - upgrading your home’s insulation, heating system, and energy performance – is increasingly being presented as a solution. But with upfront costs often substantial, is borrowing money to finance these improvements a smart move?
### the Financial Case for Retrofitting
Retrofitting isn’t cheap, but the long-term benefits can outweigh the initial investment. According to a home retrofit report from AIB published in December, installing a heat pump, such as, can reduce your energy usage by up to 20 per cent. that’s a significant saving, especially with energy prices remaining volatile.
The Government offers a low-cost loan scheme to help homeowners finance these upgrades. Borrowing €40,000 over 10 years currently results in monthly repayments ranging from €385 with Bank of Ireland to €402 with PTSB. While you’ll be paying back between €6,240 and €8,256 in interest over the loan term, consider this alongside the savings on your energy bills. For ten years, you’ll enjoy a warmer, more comfortable home *and* lower monthly expenses.
#### Beyond Bill savings: Increasing Property Value
The benefits extend beyond reduced energy bills. retrofitting can significantly increase your home’s value. The Sustainable energy Authority of Ireland (SEAI) estimates that home values increase by 1 per cent for every level you climb on the Building Energy Rating (BER) scale.
As a notable example, upgrading a home from a BER of G to a B2 could boost it’s value by a substantial 10 per cent. This is becoming increasingly vital to prospective homebuyers. A MyHome.ie survey in February 2023 revealed that three-quarters of buyers are now more inclined to consider a property’s BER rating, driven by sustainability concerns and the desire to avoid high energy costs.
Think of it this way: a car depreciates as soon as you drive it off the lot. A retrofitted house, however, is likely to *appreciate* in value. And unlike a car loan, which typically carries higher interest rates, the government-backed retrofit loan offers a more affordable financing option.
### Retrofitting in Ireland: Progress and Future Needs
Significant progress has already been made. Between 2019 and mid-2024, over 213,000 homes benefited from SEAI schemes and grants to improve their energy efficiency, according to the Department of the Habitat.However, much more needs to be done, and quickly, to meet Ireland’s aspiring 2030 carbon reduction targets. Government budget watchers are hoping to see a shift in focus from short-term energy credits to more substantial grants,providing crucial financial support to cash-strapped households looking to take control of their energy bills.
While the long-term savings are clear, the upfront cost remains a barrier for many. Exploring available grants and carefully assessing your individual energy consumption are vital first steps.
Have a personal finance question? Contact us at onthemoney@irishtimes.com. If you missed last week’s newsletter, by Dominic Coyle on holiday car hire pitfalls to avoid, you can read it here.