The Green Deal is a new government scheme to encourage people to make energy saving and green investments in their homes and businesses. Recently the government announced that the scheme could cover the cost of installing solar which at the moment is out of the reach of many homeowners due to the high initial investments costs even though you will recoup your costs.
This green loan scheme works by lending home owners the money to improve their homes in order to save money on energy bills. As the first scheme of this type in the world it is not the individual who the loan is taken out against but the property. This means that when the house is sold on the loan stays with the house.
Controversially this has caused some discussion; on the one hand it should mean that anyone with a home could be eligible for a loan even if they would not normally be able to get one. People are also concerned that there may be problems with trying to sell on a house with an inbuilt debt on it which needs to be repaid.
The government argue that the theory is by making a green deal the homeowner will not be out of pocket. The savings made by the home improvement will be used to repay the loan. This could mean that you would not be any worse off financially as the money you save on your energy bills is used to repay the loan.
Although at first hand it seems to be a risky option the government claim that this new way of thinking will eventually become mainstream. The details of the scheme are still being hammered out but there are concerns that certain improvement will not make the savings that are claimed meaning the homeowner could in theory be left with a loan to repay out of their own pocket.
The return on solar is guaranteed by the government already so making the loans available to invest in solar means it will be a reliable alternative to the likes of the Eon free solar panels that seem so popular at the moment. With a green deal loan you should easily be able to repay the loan and make a significant tax free profit without it costing you a penny.
Once the green deal for solar is confirmed this offer will quite literally be too good to ignore. Essentially you will be able to borrow the money to get a solar PV system installed. You will be able to pay back the money from the feed in tariff payments that you would get paid. Solar has a good payback period of between 7 to 11 years. Although this seems a long time you would benefit financially from installing solar long after the loan is repaid. Typically you would be £30,000 better off with the maximum sized domestic system over a 25 year period.
It does however rely on the government finalising the details such as exactly who will be administering the loans and what the interest charges will be. It also raises the ethical question of homeowners being indirectly penalised for not having a house that faces south. However if you own your home and you have a south facing roof this really is a deal you shouldn't miss out on.
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