What is a green mortgage?
If a property meets certain environmental standards, or the borrower commits to improving the property’s environmental performance, borrowers can unlock a ‘green mortgage’. Green mortgages generally provide favourable terms compared to standard mortgages (eg lower interest rates or increased loan amounts).
In essence, a green mortgage is a way to increase the appeal of owning a green (ie environmentally sustainable) property.
What are the benefits of a green mortgage?
The main benefit of a green mortgage is that property owners will be offered lower interest rates and/or a higher borrowing amount, thereby unlocking significant cost efficiencies and savings in repayment costs.
The environmental and energy efficiency benefits are also key. For example, decreasing energy costs for residents and reducing carbon emissions from inefficient housing (which account for 14% of total UK emissions).
How can I get a green mortgage?
Green mortgage products are wide in scope and each lender will have different eligibility requirements.
By way of example, for prospective homeowners to qualify for a green mortgage some current green mortgages require the buyer to:
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buy a home that has a valid Energy Performance Certificate (EPC) rating of A or B
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buy a new-build property (eg from a builder or a developer) that has a Predicted Energy Assessment (PEA) of A or B
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make commitments to carry out 'green' home improvements (eg replacing single-glazed windows, installing solar panels and otherwise making the property more energy efficient)
Additional requirements and considerations for landlords
For landlords to qualify for a green mortgage, some currently available green mortgages require the buyer to have had a property for more than 5 years with an EPC rating of A to C.
Remember that, as a landlord, you can only let properties that meet the Minimum Energy Efficiency Standards (MEES), and you must provide your tenants with a valid and up-to-date EPC (amongst other things).
Landlords should particularly consider key questions when buying a property to let out, other points to consider before buying a property to let out, and the tax implications of buy-to-let properties.
Irrespective of what kind of buyer you are, before you select a mortgage product, you may wish to consider speaking to a mortgage adviser to discuss what options are best for you. You can Ask a lawyer if you have any specific questions.
