Threshold Mortgage Advice

What is a Green Mortgage? A guide to energy efficient mortgages

Available on new build homes and energy efficient properties in the UK, a green mortgage rewards eligible buyers with cash back deals and exclusive interest rates that can help to cover the costs of moving to a new property or running your existing one.

So who is eligible for a green mortgage and how do you get one?

In this guide to “what is a green mortgage?” we set-out the key criteria your home needs to qualify for this mortgage product.

What is a green mortgage?

A green mortgage is a type of mortgage that’s exclusive to buyers or owners of energy efficient properties in the UK, by which we mean homes that score an A or a B rating in an EPC (Energy Performance Certificate).

Unlike some other mortgage products on the market, lenders typically reward eligible buyers who qualify for a green mortgage with some form of incentive for taking out the mortgage. This usually consists of either a cash back lump sum on completion of your purchase, or a lower interest rate for a fixed period of time, which can help to lower the monthly repayments you make towards paying off your mortgage.

This means that if your existing home is A or B rated you could potentially bring down your mortgage repayments or be rewarded with a cash lump sum just by switching your existing mortgage to a green mortgage. Likewise, if you’re about to purchase a home that has an EPC score of A or B you could also save money by taking out a green mortgage.

How do green mortgages work?

Green mortgages work in much the same way as any other type of mortgage on the market. You’re essentially asking to borrow money from a lender (a bank or a building society) in order to buy a home. You’ll then repay this loan back in monthly instalments over a fixed period of time.

The difference with a green mortgage versus a conventional one is that this particular mortgage product is only available on properties that achieve an EPC A or a B rating.

As we touched on in the previous section: “what is a green mortgage?”, a green mortgage also offers you some form of financial incentive for taking out the product; either a preferential interest rate or a cash payout to spend as you please.

What are the benefits of a green mortgage?

Green mortgages offer two main benefits: cash back for taking out your mortgage and/or preferential interest rates compared with other products on the market.

This means that, not only, could you be given a one-off tax-free payment when you take out a green mortgage, you could also be offered an exclusive rate of interest that’s lower than other mortgage products the same lender offers. This can help make your monthly mortgage repayments lower than if you were to take out a conventional mortgage; saving you money across the lifetime of your mortgage.

Being eligible for a green mortgage also means that your home is energy efficient, which is a benefit in itself. The more energy efficient a home is, the cheaper it is to run, which means you’re likely to save money on things like heating.

With energy bills now one of the biggest monthly outgoings homeowners have to meet, moving to an energy efficient home, or upgrading your existing one to be more energy efficient, could help to significantly reduce the amount you spend on energy each year.

Do all lenders offer a green mortgage product?

No, not all lenders offer green mortgages – yet – but as Britain moves ever closer to becoming carbon neutral the choice of lenders offering a green mortgage product is increasing all the time.

Natwest, Halifax, Barclays, TSB, Virgin Money, and Nationwide are just some of the high street lenders currently offering some form of green mortgage in addition to their conventional mortgage products. You’ll also find many building societies offering a green mortgage incentive that rewards buyers of energy efficient homes in Britain.

Green mortgages are also very common with new build properties, as the requirement for these homes to be A or B rated automatically qualifies them for this type of mortgage. If you’re thinking about buying, or about to remortgage on, a new build home, a green mortgage is definitely worth considering.

Compare green mortgage deals

If you’re looking to purchase an energy efficient home in the UK and you’d like to discuss your options for a green mortgage, don’t hesitate to engage our experienced team for a no-obligation chat. You can request a callback via our online appointment form.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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