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Loans & Mortgages

Energy Efficient Mortgages Explained

Many Swiss Banks now offer so-called energy efficient mortgages (EEMs), also known as green mortgages. But how does that trendy label translate into financial benefits? We at moneyland.ch have dug up the money facts behind the greenery to help you understand this mortgage option.

Living sustainably, conserving resources and making use of renewable energy are hot topics these days. While «sustainable» banking may only appeal to a niche market, Swiss Banks have been actively adopting energy efficient mortgages.

Over 30 Swiss banks, including Cantonal Banks, the Alternative Bank Switzerland, Raiffeisen Switzerland, Bank Cler and a number of regional banks now offer some form of energy efficient mortgages.

Still, it’s a relatively new trend. At the turn of the millennium, only 3 Swiss banks offered EEMs. These were Migros Bank, the Basellandschaftlichen Kantonalbank, and the Zürcher Kantonalbank.

Green mortgages: Discounts

Energy efficient mortgages, green mortgages, Minergie mortgages, green loans, environmental loans and sustainable mortgages are just a few of the terms used by banks to describe products based on one principle: When you take out a loan to purchase or renovate an energy efficient home, you get more favorable rates. On average, the interest rates of green mortgages are currently between 0.15% and 0.8% lower than those of identical standard mortgages from the same lender.

Unfortunately, you can’t combine these discounts with other rate mark-downs, such as family mortgage discounts. If you cancel your mortgage policy prematurely, you will usually be liable to repay the full difference between the discounted green mortgage and a regular mortgage.

Energy efficient mortgages: Criteria

Green mortgages are issued for both newly constructed homes and the renovation of existing buildings. Energy efficient construction is the key criterion in the EEM equation. Building projects or completed homes will have to meet fixed energy efficiency requirements in order to qualify.

The cost of constructing an energy efficient building is typically five percent higher than that of building non-green housing. Proper insulation, ecological design peculiarities and an energy-efficient design are all criteria which are taken into account when you apply for an EEM. Most financial service providers use the Minergie or GEAK (cantonal energy efficient construction certificate) standards as a baseline for EEM eligibility.

Energy efficient mortgages: Minergie standard

The Minergie energy efficient building standard is the most widely recognized in Switzerland. Certification cost 1200 francs on average, but the exact price will depend on the building’s size and category, and which Minergie certificate you need. The good news is that some banks will cover the cost of certification.

Variations of the standard Minergie certificate include Minergie-P (Maximum 30 kWh/m2a energy consumption), Minergie-A (zero heat consumption) and Minergie-Eco (includes additional ecological and health related criteria).

Energy efficient mortgages: GEAK

The cantonal energy efficient construction standard, known as GEAK (or CECB in French-speaking Switzerland) is also accepted by Swiss banks as proof of EEM eligibility. Under this rating system, buildings are classified using categories ranging from A to G, depending on energy use. The «A» ratings indicates maximum energy efficiency, while the «G» rating indicates poor energy efficiency.

If you are using GEAK certification to apply for an EEM on a newly constructed home, you will need an «A» rating to be eligible. But some banks have also begun to offer green mortgages to homeowners looking to make energy-saving upgrades to existing homes. Buildings with a GEAK designation of A, B, or C are eligible for a green mortgage towards renovation. Some banks adjust the EEM rates to match a building’s certification. In this case the lowest mortgage rates are reserved for homes which meet the highest energy efficiency standards.

Energy efficient mortgages: Features

In most cases, an EEM is a fixed rate mortgage with a relatively short tenure of 5 years or less. energy efficient mortgages with a variable mortgage rate are rarely offered by lenders.

The amortization obligation for most EEMs falls within the first five years. Some banks will only provide you with an EEM if the property in question is your primary residence. In most cases, when you build a new home, only up to 250,000 francs of your mortgage will be eligible for the low EEM rates.

Energy efficient mortgages compared

Promoting the construction of green housing is a plus. But banks are, first and foremost, in the business of making money. Offering green mortgages gives banks the opportunity to promote their brand and products in keeping with the latest environmental trends. What’s more, the contract periods and terms are often only guaranteed for a limited amount of time, after which regular mortgage rates apply. Some critics consider EEMs to be little more than marketing gimmicks used to lure home buyers towards more expensive mortgage products.

Another consideration is that, although an EEM gives you reduced rates, it isn’t always the cheapest mortgage solution for energy efficient housing. The rates offered by various Swiss lenders vary in a big way, and it isn’t uncommon to find regular mortgage rates from one provider which are lower than the special reduced rates you could get with an EEM from another lender. Checking out the latest rates using an unbiased mortgage comparison tool is a smart move here, and getting more than one mortgage offer is also recommended.

More information:
Swiss mortgages compared

If you would like to receive a detailed spreadsheet outlining all relevant energy-efficient mortgages offered in Switzerland, just request a copy here (as a PDF).

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Expert Benjamin Manz
Benjamin Manz is CEO of moneyland.ch and an independent expert on banking and finance.
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