What Is a Green Mortgage?

A mini guide to green mortgages

When it comes to green mortgages, the future is bright – with the concept benefitting both homeowners and the wider property community thanks to the enhanced focus on environmentally friendly homes.

In this blog post, we uncover what it means to have a green mortgage, what the benefits are, and how you could become eligible for a green mortgage in your own property – new or not.

Green mortgages: explained

A green mortgage refers to a type of mortgage which can be used when purchasing a property that ticks certain energy efficiency standards – with green mortgages typically boasting a lower interest rate when compared with a standard mortgage from the same lender.

The main idea of green mortgages is to encourage property owners to put more time into creating and embracing energy efficient solutions for their homes – with green mortgages also available to those who reduce the carbon footprint of a home they already live in.

While the exact terms differ between lenders, there are three main types of green mortgage currently available:

1. Lower lending rates for those whose energy efficiency ranks highly.

2. Discounted mortgage rates or cash-back for those who spend money to improve an existing property’s energy efficiency.

3. Additional borrowing for energy efficient home improvements through re-mortgaging.

If you know anything about mortgages, you will know that a lender pays attention to your outgoings and income when assigning you a borrowing amount.

Green mortgages are calculated on a number of things including the property’s EPC rating – with a rating of A or B meaning that the buyer will spend less on energy bills and so can pay more towards their mortgage repayments.

Thus, not only will you benefit from a green mortgage in terms of potentially better interest rates, but you may also be able to borrow more and get a better house.

What is an EPC rating?

EPC chart

The EPC rating of a property is its Energy Performance Certificate rating and looks at the energy efficiency and running costs of a home. This is then ranked from A (best) to G (worst), with the certificate outlining improvements that could be made to boost the score for a specific property.

Completing these recommendations may push you into the eligibility category for type 2 or 3 of the green mortgages, listed above.

What are the benefits of a green mortgage?

As mentioned above, the benefits of green mortgages are wide-ranging – including:

· Lower energy bills

· Access to better mortgages rates and lower interest rates

· An increased on your mortgage borrowing amount

·  The potential to increase the value of your property

All of these are subject to the lender you opt for.

Who is eligible for a green mortgage?

To be eligible for a green mortgage, you need to either be in the market to purchase a home which meets the energy efficiency standards laid out by your lender’s green mortgage policy, or you need to be committed to making the necessary changes to upgrade your existing property and push it into the eligible category of EPC rating.

In short, those who are eligible must fit into one of the following categories:

· Be purchasing a property with an EPC rating of B or above

· Be committed to making energy efficient changes, followed by a re-mortgage

Are there any disadvantages?

Aside from the fact that green mortgages are still very new and thus are fairly limited in terms of their availability across large lenders, there are virtually no downsides to buying or improving the energy efficiency of your property.

Our one piece of advice would be to check all the different mortgage terms and rates before committing – just because a lender offers a green mortgage, doesn’t mean that’s the best deal they have on offer.

How can I learn more about green mortgages and determine my own eligibility?

If you’ve still got questions about green mortgages and want to find out more about the kinds of properties to search for as part of your green promise, our team are here to help. As established and reputable estate agents serving the Newcastle area, we have a wide range of properties suitable for all buyers, whether you’re a first time buyer or a growing family.

Get in touch for more information and to start your search for your next home. 

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