You’ve heard of fixed rate mortgages, tracker mortgages, and discount mortgages. But do you know what a green mortgage is? In this article, we explain everything you need to know: what they are, how they work, and if you’re eligible for one.
What are they?
A green mortgage rewards you for buying or owning an energy efficient home. The same rule applies if you make improvements or renovations to your home to make it more energy efficient.
How do green mortgages work?
Green mortgages can be split into three main types:
Cheaper rates for properties with high energy efficiency ratings (i.e., EPC rating of ‘B’ or above)
Standard mortgages that offer cashback to homebuyers who buy energy-efficient properties
Standard mortgages that offer cheaper rates, or cashback, when homeowners make energy efficient improvements
The main point of a green mortgage is to incentivise homeowners to be greener.
Why should I apply for a green mortgage?
Why bother? It’s a fair question to ask. We’ve already covered some of the reasons, but there are many other benefits to a green mortgage; the lenders need to give you a reason to apply for one after all. So, then, what are they?
Lower interest rates – less interest means lower monthly repayments. Put simply, you save more money.
Lower energy bills – less money going out on your utilities. Yep, same again; you’ll save more money.
Higher property value – eco-friendly homes are highly sought after, and resultantly, more expensive. But making any eco-friendly renovations can increase your property’s value by thousands.
Why do green mortgages exist?
You’re likely wondering why they’re being offered in the first place. This bit is fairly simple.
Lenders are offering green mortgages off the back of the UK Government’s pledge to reach net zero carbon emissions by 2050. The UK has signed up to the Paris Agreement to reduce global warming to 1.5°c, and reduce greenhouse gas emissions, to achieve a climate neutral planet.
In order to achieve this, the Government is expecting all properties in the UK to have an Energy Performance Certificate (EPC) rating of at least ‘C’ by 2035. All properties have an Energy Performance Certificate ranging from ‘A’ to ‘G’. ‘A’ being the most energy efficient, whilst ‘G’ is the least.
In a nutshell, green mortgages are:
a way for lenders to support the Government’s pledge to become carbon neutral
incentivise homeowners to live in energy efficient homes through discounted rates or cashback
Can I apply for a green mortgage?
It depends. If you’d like to apply for a green mortgage product, your home will need an EPC rating of ‘A’ or ‘B’ to be eligible. You can even apply for a green mortgage if you begin to make improvements and renovations to your home to make it more energy efficient.
You can also remortgage on to a green mortgage if your property has a high enough EPC rating.
You will, of course, still need to meet the standard mortgage lending criteria set by your lender.
Are you unsure what your EPC rating is? You can check your property’s EPC rating here.
If you’re interested in a green mortgage and would like to know a little more, we’re always happy to help. Feel free to get in touch with us here and we’ll help you with everything you need.