How green mortgages work – and could they save you money?

When it comes to living more eco consciously, we all try to do our bit, whether that’s recycling and composting or rethinking our transport to work to help the planet. Our property choices can pave the way to a greener future too.

Green mortgages are becoming popular throughout the UK, with these specialist home loans now more widely available than ever before. But, what is a green mortgage, how does it work and could it be your ticket to saving money as well as the planet during your upcoming property purchase?

Going eco with your mortgage

Green or eco mortgages are home loans that are used specifically to purchase an energy efficient, or soon-to-be energy efficient, property. They can finance your property purchase or alternatively fund eco-friendly home improvements, like insulation and glazing upgrades. Green mortgages were initially introduced to help the UK meet its net zero goal, supporting the creation of eco-friendly properties via new and existing housing stock.

Obtaining a green mortgage comes with some strict criteria. Eligible properties must hold a high Energy Performance Certificate (EPC) rating of A or B. For those looking to use a green mortgage to fund energy efficient improvements, a potential lender will want to dig deeper into how funds will be spent to improve the EPC rating of the property. They may also give you a timeframe to complete the works.

So, what’s in it for you?

Green mortgages reward borrowers for choosing sustainable housing with upfront financial incentives, such as lower interest rates, cashback offers and discounted fees. These incentives make buying a property in the UK more affordable and accessible, which is something that everyone can benefit from!

With a green mortgage, there’s also the opportunity to borrow so much more, with some lenders increasing the maximum loan amount due to the lower running costs of energy efficient homes.

And the savings continue…

Energy efficient homes are cheaper to run, that’s a fact, and it’ll save you some serious money in the short term.

Eco homes consume less gas and electricity than conventional setups, and it’ll show in your monthly energy costs. As the proud new owner of an energy efficient property, you may also qualify for government incentives if you choose to upgrade your home’s eco credentials some more, stacking further savings on top of the lender benefits we mentioned earlier.

Long term, buying or upgrading an energy efficient home reaps more rewards, especially when the time comes to sell your property as Oxford Economics explains:

“Our analysis of house prices by EPC rating shows that willingness to pay increases with a higher EPC rating of a home. We find that consumers are willing to pay 3.4% more for a high energy-efficient home (A or B rated) compared with Band D, as shown in the Chart, highlighting that energy efficiency is now an important factor in home-buying decisions.”

Talk to us about green mortgages

Here at The Mortgage Bureau, we help home buyers like you understand all your options and get the best deal. This includes the greener mortgage products described here. Speak to your local mortgage advisor today to get started.