Your guide to green mortgages

We all know of the need to make the world a greener and a better place, and as part of this the UK government, since publishing its Clean Growth Strategy in 2017, has been encouraging mortgage lenders to offer green mortgage products. The concept behind this was to create cheaper mortgages that take into consideration the lower lending risk attached to homes which are more energy-efficient; in essence to make it pay for homeowners to be green.

Those lenders offering green mortgages will either give borrowers better terms if they purchase an energy efficient home, or if they give a commitment to improve the efficiency of their current home.

As well as saving money on your energy bills every month, lenders give you cash back and/or a better interest rate when you get a green mortgage on an energy-efficient home.

Some deals are restricted to people buying a new-build property. There are now a number of lenders that offer their own versions of a green mortgage.

In general green mortgages fall into two types; those that reward you for living in an energy-efficient home and those that reward you for undertaking ‘green’ home improvements.

In order to get a green mortgage you need to look at the eligibility criteria for a green mortgage from lender to lender, and it varies.

If the property you are either living in or buying has an EPC (Energy Performance Certificate) rating of A or B, you will get cash back or a preferential interest rate on your mortgage. This kind of green mortgage is available to homebuyers and, in some instances, remortgagers.

An EPC is a document showing how energy efficient a home is; they are required whenever a property is built, bought or sold, and last for 10 years. The rating system used is from A to G, with the most energy efficient homes being given an A rating, and the least getting a G.

You can usually find details of a property’s EPC rating online; go to www.gov.uk/find-energy-certificate for properties in England, Wales or Northern Ireland and to www.scottishepcregister.org.uk/ for properties in Scotland.

If you carry out green improvements such as upgrading your heating system, putting in solar panels, or replacing single glazed windows, for instance, lenders will usually offer you a reduced interest rate or cash back on any money they lend you in order for you to upgrade your home’s energy efficiency.

The reason that lenders are willing to give such incentives is because they judge energy efficient properties, in this unprecedented time of tackling climate change, as less risky and with more likelihood of keeping their value. Another upside for them is that if monthly energy bills are less a homeowner has a lower chance of struggling to pay the bills and so be more likely to be able to meet their mortgage repayments.

Green mortgages are now offered by a good number of lenders, including Nationwide, Barclays, NatWest, TSB, Virgin Money, Halifax, as well as some non-high street lenders.

When looking for a mortgage deal it always pays to shop around and compare lenders.

If you would like more information about green mortgages, or help finding the right mortgage for you, then Feel Good Financial is here to help you. We will advise you on the most suitable mortgage for you from our extensive panel of lenders.

Whether you are a home-mover, a first-time buyer, are looking to remortgage, to purchase a buy-to-let property, or releasing equity from your home, we can help you.