Design Process
Mortgage for building an eco-friendly home
This week we met with a representative from Triodos—an ethical bank—to learn about their bank’s proposal for eco-friendly home mortgages.
In fact, we first came into contact with Triodos several months ago through a lecture by one of its most prominent figures, the banking professional Joan Antoni Melé. We were captivated by the ethical banking philosophy, which prioritizes financing projects that provide social or environmental added value.
Mortgages are no exception; therefore, eco-friendly homes are prioritized for financing, with the incentive that a higher efficiency rating leads to lower interest rates.
What percentage does the bank lend for building a house?
Currently, the bank is offering mortgages for 70% of the total value. However, it is necessary to clarify what is meant by total value:
Option 1: The total value considers only the dwelling
Option 2: The total value considers both the dwelling and the land
In the case of Triodos, the total value is based on Option 2 (dwelling + land), which makes the mortgage more viable, as most clients typically purchase the land with their own savings, easily accounting for 30% of the total value.
If the land is not included in the total value, the client must first pay for the land and then have 30% of the construction costs available. This can be an obstacle when undertaking the project due to the significant amount of capital the client must have upfront in the bank.
What is the average value of a mortgage for an eco-friendly home?
Based on our experience with clients and discussions with the bank, the average mortgage ranges between 150,000 and 200,000 euros.
In this case, the cost does not include the price of the plot (approximately 30% of the total), which, as mentioned, must be provided by the client.
One must also consider the added value of building an eco-friendly home. Embarking on the construction process is a project of approximately two years that involves risks and requires constant monitoring and involvement from the developer.
For this reason, the moment the house is completed, its market price usually increases by about 10-20%. This means that if we were to put it on the market once finished, we would have already recovered the investment.
What is the average amortization period for an eco-friendly home mortgage?
While the typical client seeking a mortgage is between 25 and 40 years old, the profile for an eco-friendly home mortgage is more specific. Generally, it is a stable couple with children or planning to have them soon, falling within the 30 to 40 age bracket.
This is simply because seeking a mortgage for an eco-friendly home is a project people consider when they have a family and wish to improve their quality of life. This is even more true for an investment in ecological construction, as it is a conscious decision and a life project—something that usually does not happen until they feel they have achieved a certain level of emotional and financial stability.
Given that the average age is around 35, mortgages are typically not planned for more than 20-25 years, which in this case usually coincides with the couple’s retirement age.
What interest rate is currently paid on a mortgage for an eco-friendly home?
Regarding eco-friendly homes, the only bank we have found that distinguishes them from conventional home mortgages is Triodos, and its interest rate as of November 2015 is 1.20%.
How does the mortgage for building an eco-friendly home work?
When it comes to building a house, the mortgage funds are not disbursed all at once. Instead, the bank makes contributions as construction progresses and phase completion certificates are presented.
This is because the bank wants to ensure that the money paid has been effectively used to build what was agreed upon.
Is there a grace period for the mortgage during the construction of the house?
Yes, and in fact, this is why a maximum deadline for the completion of the works is agreed upon between the construction company, the client, and the bank, after which installment payments will begin.
In any case, at the studio, we always remind our clients that building a well-insulated eco-friendly home with natural materials is not just a matter of conscience; it is about saving ourselves from the “second mortgage.” This is the so-called energy mortgage—the amount of money it will cost us month after month to keep our home warm if this is not achieved passively through efficient, well-insulated construction systems and natural solar gain.
The cost of an eco-friendly home is usually between 10% and 30% higher than that of a conventional house. However, unlike the mortgage, this extra investment pays for itself within a few years and, from day one, will result in an improvement in the comfort and well-being of our family.