This guide aims to clarify any uncertainties you may have about green mortgages.
Go2 Green is a dedicated team of passionate individuals committed to advancing the transition towards Net Zero.
Our expert green mortgage brokers are here to assist you with your green mortgage needs. Additionally, we strive to be a reliable source of information on renewable technologies, connecting businesses and individuals for their next green project.
Why green mortgages make sense:
Investing in improving the energy efficiency of your home, not only benefits the
planet, but it benefits you! How?
Green mortgages financially reward you for having a low energy emitting home. From interest free lending to direct cashback and low lending rates. This can result in you saving thousands of pounds over the lifetime of your mortgage.
Ongoing Energy Savings: Decreased Utility Bills: Energy-efficient homes consume less power, leading to significant monthly savings. Heat pumps and solar panels can cut energy costs by up to 50%.
What is a green mortgage?
A green mortgage is a loan designed to promote the purchase or renovation of energy-efficient properties. This type of mortgage offers rewards for owning an energy-efficient home. The specific benefits can differ between lenders.
Some examples include:
- Lower interest rates from lenders
- Higher borrowing capacity
- Direct cashback
The idea behind green mortgages is to incentivise individuals to make their home more eco-friendly.
Green mortgages are essentially a financial product designed specifically for homeowners to invest in energy efficient houses or carbon positive improvements to existing properties.
Did you know …
A massive 23% of all carbon emissions are emitted from households, and the UK housing market being some of the least energy efficient in Europe, there is a massive push for low carbon retrofits across the UK, in order to meet Net Zero.
Green mortgages are gaining popularity among homeowners, leading to an increase in the number of lenders and making the green mortgage market more competitive. This rising competition benefits borrowers by providing a wider array of product options.
The UK is a global leader in renewable energy and innovative low-carbon technologies; the advanced interoperability between the two means there’s enhanced coordination and optimisation of energy generation, storage, and consumption, leading to more efficient use of resources and improved energy management.
Between 2004 and 2022, 34 mortgage lenders have entered the green mortgage market, increasing the number of available products in the UK from just 3 in 2018 to over 50 by September 2022. The goal is to encourage the purchase of energy-efficient homes and make low-carbon retrofitting more desirable and affordable.
What are the different types of green mortgages?
While all green mortgage products encourage energy-efficient homes, they vary based on the stage your house is at in its energy efficiency journey. At Go2 Green, we can help you whatever stage you’re at.
Green Home Mortgages (EPC-Rated): These innovative financial products reward homeowners for energy efficiency. By maintaining a high Energy Performance Certificate (EPC) rating—typically A or B, and in some cases C—you can enjoy reduced monthly interest rates on your mortgage, making your eco-friendly home even more affordable.
Energy Efficient Mortgages (EEM): EEMs are versatile loans designed to help you enhance your home’s energy efficiency. These products often serve as stepping stones, enabling homeowners to qualify for green mortgages in the future.
Current market offerings include:
- Barclays Green Home Reward: Eligible customers can receive up to £2,000 to fund specific energy efficiency improvements, without the need for additional borrowing.
- Nationwide Green Borrowing Option: This program offers an interest-free loan ranging from £5,000 to £15,000 for green home improvements. Choose between a two-year or five-year fixed term, allowing you to upgrade your home’s efficiency without the burden of interest.
By using these ‘green’ financial tools, you can improve your home’s energy performance whilst saving money on your mortgage in the long run.
What are the financial benefits of a green mortgage?
The interest rates for borrowing are lower on a green mortgage. These lower interest rates make your monthly payback much lower. Buying a house with a green mortgage will save you thousands over the course of your mortgage.
Green mortgages also indirectly reduce your monthly energy bills. Green mortgages promote low carbon living, they incentivise homeowners to adapt their home to being energy efficient, these low carbon installations reduce the amount of gas/electricity you need to buy, and therefore reduce your energy bill.
Green mortgages are expected to gain prominence as the world shifts towards sustainable living. Lenders see green homes as lower-risk investments, with ‘green value’ properties likely to retain their value better over time. This is particularly beneficial for landlords who will face stricter EPC rating requirements in the future.
What is an EPC rating?
EPC – Energy performance Certificate gives you a breakdown of the energy efficiency of your home. These certificates are required whenever a property is built, bought, or sold and are valid for 10 years. The highest EPC you can get is an A, and the lowest is a G.
High EPC ratings are given to houses which are energy efficient, featuring instalments like insulated walls and lofts, solar panels and heat pumps.
You can also get a green mortgage if you do not have a high EPC rating, on the condition that you upgrade to energy efficient improvements once you have moved in. Depending on which lender you go with, these additional loans can be interest free up to a certain amount.
Given the fluctuations in energy prices, now might be an ideal time to gain a better understanding of your home’s energy performance. Click here to find out your EPC rating
Can I get a green mortgage?
In order to qualify for a green mortgage you must have a high EPC (energy performance certificate) of A or B, and in some cases C (based on a scale of A the best to G the worst). They measure the quality of the buildings energy performance.
High EPC ratings are given to houses which are energy efficient, featuring instalments like insulated walls and lofts, solar panels and heat pumps. The EPC rating is required for properties when built, sold or let.
You can also get an energy efficiency mortgage (EEM) if you do not have a high EPC rating, each lender offers different financial incentives, look under ‘different types of green mortgages’ for more details and examples.
How to get a green home mortgage:
Verify EPC Rating: Ensure your home meets the required energy efficiency standards (EPC rating of A/B, or in some cases C). Check your property’s rating here. If your address isn’t listed, contact us at [contact info] to arrange an assessment.
- Expert Consultation: Connect with one of our highly skilled green mortgage brokers to discover the ideal mortgage deal for your needs. Schedule your personalised appointment [here].
- Application and Documentation: Once you’ve selected the perfect deal, we’ll liaise with the lender on your behalf. We’ll guide you through submitting the necessary documents, streamlining the process for you.
- Offer Review and Approval: We’ll carefully review the mortgage offer with you, ensuring you’re satisfied with all terms and conditions before finalising.
- Enjoy Your Green Benefits: Upon making your first monthly payment, you’ll immediately benefit from the lower interest rate, rewarding your commitment to energy efficiency.
How to get an EEM (energy efficient mortgage)
Energy efficient mortgages are affordable ways to improve the energy efficiency of your home. Energy efficient homes are ones which emit little to no carbon, thus reducing the properties contribution to global warming.
- Free Consultation: Connect with one of our expert advisors to discuss your home and current mortgage situation.
- Customised Retrofit Plan: Our mortgage advisors will collaborate with construction specialists to design a tailored retrofit solution that enhances your EPC rating within your specified budget.
- Implementation: Once you’ve selected your preferred option, we’ll coordinate with our skilled technicians to carry out the installation efficiently and professionally.
- Green Remortgage: When the time comes to remortgage, we’ll guide you through the process, securing a green remortgage that aligns perfectly with your needs and new energy-efficient home.
What are some examples of energy efficient improvements?
- Insulating walls and roofs to triple glazed windows, so less heat actually escapes the property.
- Installing heat pumps which use very little carbon when heating your home.
- Installing solar and storage systems, which generate renewable energy, without the use of carbon whatsoever.
What is the difference between a green and a normal mortgage?
Green mortgages follow the same fundamental principles as traditional mortgages but with a focus on energy efficiency. Here’s what sets them apart:
- Qualification Criteria: The key distinction in the application process is the requirement for a high Energy Performance Certificate (EPC) rating. This rating reflects your home’s energy efficiency and is typically expected to be A or B, though some lenders may accept C ratings.
- Financial Benefits: • Competitive Rates: Green mortgages are designed to be at least as affordable as standard mortgages, with many offering more favourable terms. • Potential for Lower Repayments: Depending on the lender, you may enjoy reduced monthly mortgage payments as a reward for your energy-efficient home.
- Long-Term Advantages: • Reduced Energy Costs: A high EPC rating often translates to significantly lower monthly energy bills, providing ongoing savings. • Environmental Impact: By incentivizing energy-efficient homes, green mortgages contribute to reducing overall carbon emissions.
- Property Value: Homes with high EPC ratings may command higher market values, potentially increasing your property’s worth over time.
- Lender Variations: Different lenders offer varied green mortgage products, so it’s essential to compare options. Some may provide cashback for energy improvements, while others might offer lower interest rates or fee reductions.
- Future-Proofing: As environmental regulations tighten, having an energy-efficient home could become increasingly important, making green mortgages a forward-thinking choice.
By choosing a green mortgage, you’re not only potentially saving money but also contributing to a more sustainable housing market. It’s a financial decision that aligns personal benefits with broader environmental goals.