Green mortgages offer favourable rates or cashback for buyers of environmentally friendly homes. So how do you know if your prospective new property purchase fits the bill? Read our handy guide to green mortgages…
A green mortgage offers either a favourable mortgage rate or cashback to a borrower who buys an environmentally friendly home or makes energy-efficient improvements to their current property. Green mortgages typically offer lower interest rates if you buy a property with an energy performance rating of A or B. Energy performance relates to your home’s Energy Performance Certificate (EPC) which grades the energy efficiency of the property from A to G. A rating of A – equivalent to 92-100 SAP points (Standard Assessment Procedure Points) – is considered the most energy-efficient, while a rating of G (1-20 SAP points) is the least efficient.
Green mortgages have only been around for a couple of years but are expected to increase in popularity as more people want to do their bit for sustainability. Similarly, lenders are also keen to support the environment and encourage more of us to make older properties more energy efficient.
Improving your energy rating
They are most commonly available on new build properties but can be obtained for properties that have been renovated to be more energy efficient. To improve the energy efficiency rating of your home, you can have windows double glazed, insulate the loft, insulate the walls if they are cavity or solid walls and replace your boiler. You could also look at your heating source. According to EDF Energy, having a wood-burning stove instead of an open fireplace can offer greater fuel efficiency in the long term.
In addition, draught-proofing your home can help, which means sealing gaps around doors, windows, and pipes. You can also install solar panels which will boost your energy rating to D or above but remember most lenders will require you to have an energy rating of A or B for a green mortgage.
Lower rate mortgages
There are different types of green mortgages. Some offer lower rate mortgage loans for those who buy energy-efficient properties, while other lenders provide standard mortgages with cashback. Thirdly, there are mortgages with cheaper rates or cashback when you make home improvements that are considered environmentally friendly.
Large lenders offering green mortgages currently include Barclays and NatWest. Barclays has a Green Home Mortgage Scheme available on new build properties with ratings of A or B. You could apply for a Barclays Green Home Mortgage if you are buying a property directly from a builder or developer. Nationwide offers cashback for those who buy energy-efficient homes and is reported to be the biggest lender offering this type of deal. Virgin Money also offers Greener Mortgages to customers who buyer greener, new-build homes with an A or B rating. At the time of writing, Nationwide is offering Green Additional Borrowing – a chance for existing homeowners to apply for a loan of £5000 to £25,000 to make green home improvements at a competitive rate of 0.75 per cent.
For more information on green mortgages and whether you might be eligible to make a saving, please contact us. One of our expert mortgage advisers will be glad to help.