The Green Deal is the United Kingdom’s program to increase the energy efficiency of residential buildings. The program provides residents with a loan of up to £10,000 to make their home more energy efficient. The advantage are that residents do not have any upfront costs. On the surface, it sounds like a good financial option if you live in a home that is not very energy efficient. However, you need to consider 5 potential problems before you sign on the dotted line.
1) Inaccurate Estimate of Energy Savings - One of the key concepts of the Green Deal is called the Golden Rule. The rule states that the amount of energy savings must be more than the cost of the improvements. Estimating the energy savings will depend upon an accurate assessment by a Green Plan Advisor. Although they are trained and certified to make the assessment, they can make mistakes. When you are given your assessment, make sure you look for unrealistic energy savings. Also, some companies may have a standard model to use for the assessment, and it may not accurately match your home’s condition. Additionally, the estimated savings may not be accurate if it is based upon a current family of 4, but 2 of the children are graduating school soon and will be leaving the household. If the energy savings are not calculated correctly, you could wind up with a larger energy bill than expected.
2) Finance Rate – The finance rate is about 6.9%. You might be able to get a better rate by shopping around and getting your own loan.
3) Cross Selling – The Advisor may have ties to the company providing the financing or to the installers. As a result, the Green Plan Advisor may try to convince you to make other improvements to your home that has nothing to do with the Green Deal. If you feel pressured to buy items not covered under the Green Deal, you might want to consider working with another assessor.
4) Assessment Fee – Although advertised as having no upfront costs, the Green Deal Advisor is authorized to charge a reasonable assessment fee of up to £150. Most companies charge less than the full authorized amount, and some companies may not charge any fee. Consequently, it pays to shop around before scheduling an assessment.
5) Home Resale Problems – If you sell your home, the new owners will be forced to assume responsibility for the loan because it is attached to the home’s electric bill. Some potential buyers may hesitate to purchase a home with an existing loan. If you did everything right, you should be able to prove that the overall energy bill for the home is less than what it would have been without the improvements made under the scheme. However, that argument may not sway all buyers.
The Green Deal Scheme may or may not make financial sense for you. Only you can make that decision. However, by being aware of potential problems, you are in a good position to make a decision that is right for you.