Green Mortgages: A Sincere Effort or Corporate 'Green-washing'?
Filed under: Mortgages, Your Home
By Kerri-Lynn McAllisterSpecial to WalletPop.ca
The green movement has caught on everywhere, and the banking industry is no exception.
Capitalizing on the trend, Canadian lenders have introduced a slew of 'green' mortgage products that cater to borrowers with eco-friendly homes.
According to a recent survey by BMO, almost half of Canadians (45%) plan to make green upgrades to their home, and 89% said they would even pay more for energy efficient features, so long as it reduced energy costs.[1]
So, the consumers have made the call and the banks have answered. However, while the environmental intention may be noble, this does not necessarily imply that green mortgages have been executed in such a way to present customers the best deal. That is, green mortgage products do provide some discount off posted mortgage rates, but they will not get you the lowest mortgage rate available.
Reviewing the options
Let's review the options and evaluate the merit of the foremost green mortgage products on the market. It is worth pointing out that there is not a standard of what should classify as a green home.
TD Canada Trust Green Mortgage
The TD Canada Trust Green Mortgage provides a 1% discount on the posted 5-year fixed TD mortgage rate. In addition, TD also offers a cash rebate incentive when you purchase CSA® approved solar panels or make ENERGY STAR® certified purchases. The rebate can be up to 1% of your principal amount. As an added bonus, TD will make a $100 donation to the TD Friends of the Environment Foundation.
| Current TD 'green' rate* | Best available rate* | Difference |
| 4.39% | 3.19% | +1.20% |
BMO Eco Smart Mortgage
The Bank of Montreal started offering green mortgages this year and has attached the most attractive rate offering of all the major banks. Currently, the BMO mortgage rate stands at 3.79% for a 5-year fixed Eco Smart Mortgage. In order to qualify, your home must meet the requirements of their checklist, which is determined by a third party energy auditor. One advantage of this product is when your mortgage is up for renewal, you do not have to reconfirm the Eco-requirements.
| Current BMO 'green' rate* | Best available rate* | Difference |
| 3.79% | 3.19% | +0.60% |
RBC Energy Saver Mortgage
The Royal Bank of Canada Energy Saver mortgage is the probably the least attractive of the lot. It only offers a $300 rebate on an energy audit on your home. The starting point for the green mortgage is RBC's posted mortgage rates, which are inflated compared to its own discounted rates and especially to the best rates on the overall market.
| Current RBC 'green' rate* | Best available rate* | Difference |
| 5.39% | 3.19% | Save $300 |
Scorecard
The cash rebate offered by RBC, and even the better one offered by TD, may look attractive due to the immediacy of the cash return, but compare these savings of a few hundred dollars to the thousands you will save with a much lower mortgage rate. Even tenths of a percentage difference in your mortgage rate can equate to thousands of dollars over the term of your mortgage.
In the end, none of these green mortgages really incentivise borrowers to go green.
One rebate that is worth pursuing is the Canadian Mortgage and Housing Corporation (CMHC) rebate available on insured financing. On CMHC-insured properties (mortgages with down payments of less than 20%) CMHC will refund 10% of your insurance premium and make an extended amortization period possible when you purchase an energy-efficient home or make energy-saving renovations.
Go green for yourself, not the banks
Is it a good idea to go green with your home? Absolutely – but do it for the environmental impact, energy cost savings or peace of mind, and not the bank. You can even make energy-efficient upgrades to your home with the money you save from simply seeking out the best mortgage rate.
So, the moral of the story is this: green mortgages are one case where it categorically does not pay to go green.
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