A Green Mortgage allows house buyers preferential rates if the property they are investing in meets a set of environmental standards.
We’ll explain what this ‘green’ house criteria is and how our mortgage brokers can help to secure you a green mortgage.
What is a green mortgage?
A green mortgage is a type of mortgage which rewards buyers of energy efficient homes by offering them more favourable terms than the standard mortgage terms.
These terms can include a lower interest rate, cashback or even both. The idea is based on the fact that house buyers will be encouraged to purchase a greener property or make environmentally friendly upgrades to their existing home.
What makes a home green?
A green home is one that uses less energy to run than a typical non-green home. It also doesn’t waste the energy it uses, making it energy efficient.
How do I know how energy efficient my home is?
You can see how energy efficient and green your home is by checking its Energy Performance Certificate (EPC). An EPC gives homes an energy rating from A to G, but lenders are only likely to offer green mortgages on homes with an EPC rating of A or B.
New builds are likely to be eligible for a green mortgage as they are built with energy efficiency in mind. However, if you don’t have a new build, there are plenty of home improvements you can make to save energy, such as adding solar panels or insulation.
Can I get a mortgage on a house with solar panels?
Yes, you can get a mortgage on a house with solar panels. There can be a few issues, such as understanding whether previous homeowners have leased or own the solar panels or finding access to funding the installation.
Solar panels are one of the main contributing factors to buyers securing a green mortgage as they will naturally increase the EPC rating of your home.
There are also a few other methods of making a home more energy efficient that can impact green mortgage rates. In fact, in March 2022, it was announced by the Government that homeowners will pay zero VAT when installing solar panels, heat pumps or insulation in their homes.
Are green mortgages cheaper?
The price of green mortgages all depend on the type of home you own. If your home already has a high EPC rating, a green mortgage may be the best option for you.
If you want to borrow more to have energy efficient improvements made, your best option may also be a green mortgage.
You may be able to get a better rate however, with a traditional mortgage and a different lender.
You should shop around and compare prices before making any rash decisions. Your best option is to speak to mortgage professionals in order to find the right mortgage deal for you, whether that is a green mortgage or a traditional one.
Our friendly and knowledgeable team of mortgage advisors can offer expert green mortgage advice and help you to make the best decisions for your household.How do you get a green mortgage?
Finding a green mortgage is not drastically different from finding a standard mortgage. Once you have found which green mortgages you are eligible for, you can apply for that mortgage in the normal ways.
Some of the documents you may need can vary from lender to lender, but you will generally have to provide proof of ID and proof of earnings too.
You will also be asked to prove your home's efficiency rating via a valid EPC rating of A or B. If your home is yet to be built, you will need to provide a predicted EPC rating or energy assessment.
There are not a huge amount of green lenders on the market, so it’s easy to get an overview of what’s on offer. The list below provides a breakdown of some current high-street bank lenders:
- Barclays offer a preferential interest rate if you buy a home with an EPC rating of A or B. The property must be a new build that was bought directly from a builder or developer. Some of Barclays’ green mortgages can be combined with a Help to Buy equity loan.
- NatWest also offers a preferential interest rate and cashback of up to £350 when you purchase or remortgage a property with an EPC rating of A or B.
- Nationwide offers £500 cashback on your mortgage when buying a property with an EPC of A, and £250 if it’s B rated. They also offer extra “green borrowing” in which you get a preferential interest rate on any money borrowed to carry out green home improvements.
- Halifax offers up to £1000 cashback for homebuyers, remortgagers and any additional borrowers who carry out green home improvements to their home.
- Virgin Money offers a preferential interest rate for home buyers who purchase a new-build property with an EPC rating of A or B. The green mortgage can also be used together with the Help to Buy equity loan.
It’s also worth noting that some smaller local lenders will offer their own versions of a green mortgage, so it’s well worth researching those too.
This is where working with an experienced mortgage broker will help - we thoroughly understand the green mortgage market and can find the best deals from both high-street and independent lenders.
How do green mortgages impact mortgage applications?
Typically, you can expect a lower interest rate on a green mortgage than a standard mortgage from the main provider.
However, your home must fit into the EPC rating of A or B in order to have a green mortgage. If it is anything lower than this, you will have to take steps to make your home greener.
Some of the high street banks and mortgage leaders state that you can only get a green mortgage on a new build, so it’s also worth shopping around and reviewing your options before committing to a lender.
Do banks and mortgage lenders support green mortgages?
Yes, generally speaking banks and mortgage lenders do support green mortgages, especially since they are becoming more mainstream due to consumers taking greater interest in climate change and energy efficiency.
Mortgage lenders could play a key part in the government hitting its target of ensuring all homes are at least EPC rated C by 2028.
Lenders have also been encouraged to review their rules to entice more buyers to get green mortgages, as well offering any additional borrowing to help buyers and owners make green improvements.
Types of green mortgages
Green Remortgages
Some banks and mortgage lenders offer preferential interest rates to new or existing customers who are looking to remortgage to a green property.
In order to remortgage to a green mortgage, you must get a EPC of A or B by making energy efficient changes to your property.
Green Buy-to-Let Mortgages
Green Buy-to-Let Mortgages often require a property to have a minimum EPC of E. However, this is going to change to a minimum of C in 2025 for all new tenancies and 2028 for all other tenancies.
As well as the EPC, some lenders have other criterias which need to be determined to ensure your property will fit their range. Some require the property to be more than 10 years old to encourage owners to improve their older houses which negatively impact the environment.
What are the advantages to green mortgages?
There are certainly a lot of benefits to green mortgages:
- You know your property is helping to lower your bill and reduce your carbon footprint;
- You may qualify for a lower interest rate or higher cashback;
- Homes with green mortgages can have increased property value.
Are there any disadvantages to green mortgages?
It’s important to be aware of the potential drawbacks of green mortgages too:
- There may be non-green mortgages available with different lenders who offer lower rates;
- There are relatively limited numbers of green mortgages available;
- Any renovations and improvements required to make your home eligible for a green mortgage may be expensive.
Getting a Green Mortgage with Go2Mortgage
Finding and securing a niche mortgage can be difficult. If you are considering a green mortgage or are looking to remortgage to one, we can offer expert advice to help you make the right decision.
If you are certain that a green mortgage is right for you, let us secure you the best deals, all completely fee-free.
If you have any questions or want to start the green mortgage process, call us today on 01204 958458 or email us at info@go2mortgage.co.uk, and we’ll be more than happy to help!