What is a green mortgage?

Everything is going green, including our mortgages! Like the family springboard mortgage, the green mortgage has gained significant popularity in recent years, with the prospect of lending a helping hand to the planet one of the main motivators behind many people’s property searches.

In this guide, we delve deeper into the green mortgage phenomenon, including what it is, how it works and the boxes a property purchase has to tick to be eligible.

What is a green mortgage?

In theory, a green mortgage offers a better way to finance a property based on its energy saving credentials. This mortgage type incentivises buying a more environmentally friendly home. Here the HomeOwners Alliance reveals just some of the perks applicants can expect if successful with the bevy of mainstream lenders currently offering green mortgages:

“If you buy a home with a valid EPC rating of A or B you may be eligible for a Green Mortgage product. These offer a reduced rate on a 2 year or 5 year fixed rate mortgage. And you could also get cashback too… If you buy a home with a Nationwide mortgage, the lender will reward you with £500 cashback if the property has a score of 92 or above on its EPC. Or £250 cashback if the property has a score of 86-91.”

Introduced to support the UK government in reaching that coveted goal of net zero carbon emissions by 2050, green mortgages aim to make property ownership more practical, affordable and efficient.

What’s the criteria for a green mortgage?

Proving your eligibility for a green mortgage is pretty simple. All you’ll need is the Energy Performance Certificate (EPC) for the property you are looking to purchase. The EPC gives it a rating of between A (most efficient) and G (least energy efficient).

The average EPC rating is D on the UK property scene. But to be eligible for a green mortgage, your property must generally have an EPC rating of A or B. At last count, just 40% of residential properties in the UK had an EPC rating of C or above, which means ratings of A and B tend to be reserved for new builds. Despite this, older properties aren’t excluded from green mortgage deals if they have the necessary rating.

Are green mortgages actually cheaper?

Not necessarily. While green mortgages promise great incentives, like cashback and other perks, they don’t tend to have the lowest interest rates on the market. If you plan to make more energy efficient improvements to the property to boost its EPC rating further however, applying for a green mortgage is often a great step in the right direction.

Whether you are mortgaging your first property or looking to remortgage, shopping around for the best possible deal for your circumstances is important. We can help you do just that! Contact our team today to get started.