Some homebuyers are green with envy

You drink organic lemonade, wear pesticide-free cotton T-shirts and bring reusable bags to the grocery store. When you buy a house, you plan to make it eco-friendly.

A green mortgage can help you achieve that goal.

Several Canadian banks, including CIBC and TD Canada Trust, offer mortgages for homebuyers concerned about the environment.

Introduced about two years ago, CIBC's Enviro-Saver mortgage provides a homebuyer with a gift certificate of up to $300 for an energy audit, which will find energy leaks and identify changes that could make the house more energy efficient.

TD Canada Trust's Green Mortgage provides a homebuyer with cash back to spend on green renovations.

"You get up to 1.5 per cent cash back of the mortgage," says Joan Dal Bianco, vice-president, real estate secured lending.

She provides an example. If you get a $200,000 mortgage, you could receive $3,000 in cash back for energy-efficient changes to your home, including buying energy efficient windows or appliances, replacing the roof or adding insulation. "All you have to do is provide the receipts."

It's easy to see why new homeowners would appreciate cash toward greening their homes. It's also possible that eco-friendly renovations may cost more than the cash rebate depending on how extensive the green renovations are.

Eco-friendly renovations could result in savings down the road, Dal Bianco says. At times when energy costs are high, "People are thinking it might cost $10,000 to replace windows but my $2,000 energy bill goes down to $1,500 a year." Over time, the energy savings pay for the cost of the windows and result in lower energy bills.

It makes sense banks would encourage eco-friendly changes, says Rick Robertson, a professor and MBA program director at the University of Western Ontario's Richard Ivey School of Business. "If you can help individuals find ways to lower the cost of operating their home, that additional cash flow is available to pay off the mortgage."

Greening a home can boost a home's property value, Dal Bianco says. As a result, making a home more energy efficient doesn't just help the earth. "It's smarter for your wallet."

Robertson agrees. If you install an energy-efficient furnace, the new furnace will "lower the cost for operating that home and ... increase the value of the home."

Aside from helping the homeowner increase property values and cut energy bills, green mortgages are wise from a marketing perspective, Robertson says. With so many lenders out there, offering green mortgages is a way for a bank to differentiate itself and benefit from the growing concern about the environment.

"It makes good business sense," he says. "In fairness to the banks, I think a lot of the leaders of those companies truly do care about the environment."

By offering green mortgages, banks are acknowledging "that environmental issues play an important factor in people's home purchases," says Franz Hartmann, executive director of the Toronto Environmental Alliance. They wouldn't offer a green mortgage "if they didn't think there was a market for this."

Providing a gift certificate for a house's energy audit "will ease the burden a bit." Offering cash back for eco-friendly renovations is also a positive development. "I'm just not sure they've gone far enough," he says.

Hartmann wants the banks to provide financial incentives that encourage customers not only to make energy-efficient renovations, but to do so using products made in Canada. Buying locally manufactured products helps reduce transportation-related pollution, he says.

Homebuyers need to calculate if a green mortgage makes financial sense, Chopik says. He gives an example. "If I'm paying 4.5 per cent and getting $3,000 cash back in the five-year term of my mortgage, am I paying for the $3,000? If I can get 4 per cent for a mortgage from somewhere else, am I saving more than $3,000 in that five-year term? That's the math I want my clients to do."

Read more on this topic:

- Looking inside your mortgage options
- Guarding your home
- First timers weigh benefits, risks
- Young shouldn't be so restless
- Banks work with immigrants
- Self-employed can bank on buying their own home