Energy Efficient Mortgage Guide
According to independent financial information experts, Defaqto, the green mortgage market grows. There are 18% more green mortgages available today than six months ago. In total, there are 648 green mortgagees available today compared to 550 last October.
The most significant change is in the Buy-to-Let sector, where there are 292 green Buy-to-Let products on the market today, compared with just 85 last October.
If you are thinking of getting a green mortgage, it is worth discussing your options with a mortgage adviser who can explain what is available to you.
What is a Green Mortgage?
Essentially, a green mortgage is meant to increase the appeal of owning a green property. A green mortgage isn't much different from a regular loan. You'll likely have the same interest rates, and you'll have to make monthly payments. However, the lender may agree to give you a larger loan to cover the costs.
Green mortgages generally fall into two categories - those that reward you for living in an energy-efficient home and those that reward you for carrying out 'green' home improvements.
You could qualify for a green mortgage by renovating your home to make it more eco friendly or buying a home with a better eco-rating. However, your home will likely need an Energy Performance Certificate (EPC) rating of B or better to qualify for a green mortgage.
An energy performance certificate (EPC) is a document which indicates how energy efficient a property is. They are required whenever a property is built, bought or sold, with certificates lasting ten years.
The rating system goes from A to G, with the most energy-efficient homes getting an A rating and the least getting a G. Details of a property's EPC rating are available online. Use the Gov.uk database if the property you're researching is in England.
A green mortgage will work the same way as a standard mortgage, but it should be cheaper than a typical mortgage from the same provider. A green mortgage will not be cheaper than a standard mortgage with a different provider. Also, there is nothing specific green about the mortgage. The positive environmental impact comes from your home using less energy than anything else.
Why Should I Get Green Mortgage?
A green mortgage functions as an incentive to improve your home's energy efficiency or to buy a home that is more energy-efficient.
Your home will be cheaper to run than a less energy-efficient home, making your monthly repayments more affordable. Green mortgages can make borrowing cheaper and lending more secure. Homes with a good EPC rating are more valuable because prospective buyers will appreciate the energy savings.
From an environmental perspective, green mortgages can reduce the UK’s level of domestic emissions by encouraging homeowners to make their homes more energy-efficient.
Whether you’re a first-time buyer or looking for a new home, you could apply for a green mortgage if you’re buying an eligible property. Shop around for a ‘regular’ repayment or interest-only mortgage. Next, apply for your agreement in principle (AiP), just as you would with any other mortgage product. If you meet the lender’s criteria, you’ll be offered a green mortgage.
When it comes to documents, you will generally have to provide proof of ID, proof of earnings, evidence of your mortgage deposit, and utility or council tax bills as proof of address. You should also prove your home’s energy efficiency by supplying a valid EPC with an A or B rating or a predicted energy assessment if your home is yet to be built.
Pros And Cons of Green Mortgages
- You may qualify for a lower interest rate or cash back.
- A home that qualifies for a green mortgage might hold its value better than others.
- You know your property is helping to reduce your carbon footprint.
- Renovations and improvements required to make your home eligible for a green mortgage might be expensive.
- There may be non-green mortgages available offering lower rates.
Green mortgages reward homeowners with reduced interest rates and cashback for owning or buying energy-efficient properties. And having a property that qualifies for a green mortgage means you’re doing your bit for the environment. The latest government data published this year revealed that residential homes produce around 16% of the UK’s climate emissions.