Green mortgages are a type of mortgage deal that offers home-seekers some sort of incentive to buy an energy-efficient property. Incentives tend to change by mortgage provider and the type of home you decide to purchase. But generally, they will include appealing advantages such as additional borrowing, competitive rates, and so on.
In fact, green mortgages are likely to offer more favourable rates and instalments to those who own a home that conforms to a certain energy standard. For instance, if you’re hoping to take out a green mortgage, lenders might expect your property to achieve an energy performance certificate (EPC) rating of A or B.
Usually, green mortgages are available for new builds that meet specific energy-efficient criteria and have been constructed in an eco-conscious way. But they may also be offered to homeowners who have recently renovated their property to fulfil high-efficiency standards and minimise their environmental impact.
If you’re thinking about applying for a green mortgage, there is one specific factor that will have a significant influence on whether you will be successful or not: your EPC.
The EPC was first introduced in 2007, and since then, every house that’s being sold or has just been built needs to undergo an energy-performance test. This will measure the property’s efficiency on a scale of A to G by inspecting a variety of things, including the boiler’s working conditions, loft insulation, and so on.
Bear in mind that an EPC is valid for ten years, after which it will need to be reviewed. You should be able to find the rating on every property listing so that you can see how ‘green’ your future home is. If you can’t find it, make sure to ask the seller for all the information you need.
If you already own a home and want to qualify for green mortgages’ discounted rates or cashback rewards, you can carry out ‘green’ home improvements. This could be anything from installing solar panels to replacing single-glazed windows. Home upgrades can improve your EPC rating and help you meet the required eligibility criteria.
As long as your property meets your lenders’ definition of ‘green’, you are likely to be offered a more competitive interest rate. Again, this is indicated by the EPC, and most lenders will reward homes with an A or B rating
Alternatively, rather than better, more favourable interest rates, some lenders may provide you with the option to choose cashback once your mortgage (or remortgage) application has been completed
Some lenders may borrow extra money on top of your standard mortgage if you’re planning to carry out ‘green’ home improvements. Therefore, green mortgages could be a useful solution for those trying to make their existing property more sustainable
Following the UK government’s pledge to achieve net zero carbon emissions by 2050, mortgage providers feel that they can play their part too. Therefore, to support the government’s plan of action, many lenders are offering competitive green mortgages to eco-conscious homeowners. Also, by putting appealing mortgage deals and rewards on the market, they are possibly encouraging more people to carry out energy-efficient home improvements.
But this isn’t the only reason why more and more lenders are providing borrowers with green mortgages. In fact, green properties and owners are often a lower-risk investment for banks and lenders. This is because green buildings are usually cheaper to run, meaning that homeowners will need to set aside less money to cover the cost of energy bills. In turn, by saving money on energy bills, borrowers are less likely to struggle to afford and meet their mortgage repayments.
What’s more, in an era where governments and people are trying to tackle climate change, energy-efficient properties are less risky purchases and more likely to keep their overall value.
Using a mortgage comparison tool can help you get a good idea of the kind of mortgage deals available. When you enter your information into MoneySuperMarket’s mortgage comparison tool, you’ll be able to compare example mortgage quotes from different providers.
Just tell us a bit about yourself, your financial situation, and your plans. We’ll help you scour the market in search of the mortgage deal that is right for your pockets and requirements. Then, feel free to use our mortgage calculators to find out how much each deal would cost you overall.
As opposed to more standard, mainstream options, green mortgages try to encourage people to buy and/or live in an energy-efficient property. But as for the mortgage itself, there’s nothing truly ‘green’ about it.
Ultimately, lenders offering green mortgages are rewarding those people who own an eco-conscious home. But when it comes to the actual mortgage providers, the fact that they have green mortgages on the market doesn’t necessarily mean that they’re supporting or investing in environmentally-friendly schemes.
There are many steps you can take to make your property more energy-efficient and sustainable.
For instance, checking the insulation of lofts and cavity walls can help you prevent heat loss. Installing double- or triple-glazed windows can also aid you when trying to preserve warmth inside your home, meaning that you won’t need to keep the heating on for hours on end.
What’s more, solar panels can be a useful, eco-friendly way to generate your own green energy. When it comes to boilers, new models are designed to provide heating and hot water in a more efficient way. So, to maximise your sustainability efforts, you may want to invest in a more ‘modern’ make.
Yes, this will likely be the case. As more homeowners and lenders seek to play their role in tackling climate change and protecting the environment, green mortgages will probably become more mainstream in the near future.
For this reason, it’s fair to say that we can expect to see more green mortgage options on the market in the coming years.