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An increasing number of lenders are now offering ‘green mortgages’ - but what are they? And how do they vary from the regular mortgage?

What are green mortgages?

Green mortgages are on the increase - and rightfully so. Not only do they incentivise making your home ‘greener’, they also encourage the building of higher EPC-rated properties, which can make home ownership more affordable in the long run.

A ‘Green mortgage’ is a specific type of mortgage given out by lenders that can offer cashback or an attractive interest rate if you are buying a property that meets certain criteria, making it fall within the ‘ green’ property category. These types of mortgages have increased in popularity over the recent years as people seek out properties that are more efficient to save on their bills later down the line. 

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What do you need to qualify for a green mortgage?

Green mortgages are available for homebuyers as well as homeowners who are remortgaging. To qualify for a green mortgage, your property must meet one of the following criteria:

  1. Have an EPC rating of A or B. EPC rating defines the efficiency of your home by awarding a rating from A to G to your property. Properties with a rating of A or B, which are the two highest ratings available, are considered to be the most efficient in retaining heat and, therefore, can be categorised as ‘green’. 
  2. Carry out ‘green’ home improvements in your home. This includes things like replacing single-glazed windows, upgrading your heating system, or installing solar panels. 

Green mortgages are available to those who are buying a property, as well as those who may be remortgaging. If you are purchasing a property, as long as it meets the green mortgage criteria, your lender or broker will be able to advise you on the green mortgage options available to you. 

If you are remortgaging and have recently made improvements to your home that increase its EPC rating, such as installing solar panels - you may be able to avail of green mortgage offers also. These can include competitive interest rates, as well as financial incentives such as cashback and gift vouchers upon completion of your mortgage or remortgage application. 

Lenders are willing to offer better deals on energy-efficient properties due to them being less risky purchases for many buyers. Green properties tend to be newer and can hold their value a lot better as the trend continues to spread across the market, generally making them a good investment. 

Can green mortgages help you save?

A green mortgage can offer more competitive interest rates than a standard mortgage from the same provider. Therefore, green mortgages have the potential to turn out cheaper long term if you have already picked a lender. In the grand scheme of things - comparing different rates from different lenders, whether ‘green’ or not, gives you the highest likelihood of getting the best deal for you; therefore, there is no way of telling whether a green mortgage will necessarily be the cheapest option on the market.

There is no denying that implementing improvements that will make your home more efficient in the long run is likely to help you save a substantial amount of money over the years. It is estimated that 18% of heat lost in our homes occurs through windows alone. By fitting in new double-glazed windows, you can significantly reduce the amount of money you spend on your heating bills for years to come. 

By increasing your property’s EPC rating as well as combining that with any green mortgage or remortgage offers, you are definitely putting yourself in an advantageous position when it comes to saving money long-term in comparison to the average consumer. 

What can I do to make my property ‘green’ ?

Making your property ‘green’, simply involves bringing its EPC rating up to an A or B. Therefore, to figure out what measures you’re going to have to take, you’ll have to take a look at your current EPC certificate. According to the the latest data from the Office for National Statistics, the median energy efficiency score for England was 67 - meaning the average property in England will have an EPC score of D.

This means that if you have purchased a property, particularly one that is older, you will most likely have to take matters into your own hands to improve its EPC score. Older properties that have not been renovated or well maintained will mostly likely be more expensive to live in as older homes were not designed with energy efficiency in mind.

Here are some ideas for home improvements that can help you raise your EPC score:

  • Internal or external insulation - It’s estimated that around one-third of all heat lost is lost through poor wall insulation. Adding internal or external insulation to the walls of your property is one of the main steps you can take to improve its efficiency and bring up your EPC rating. 
  • Increase hot water cylinder insulation - Something as simple as installing a hot water insulation jacket is not only easy but also cheap and can help you save up to a £100 a year whilst helping you improve your EPC rating. 
  • Replace single-glazed windows with low-E double-glazed windows - as much as replacing the windows across your property can be a big investment, it can have one of the most substantial effects on your EPC rating. 
  • Install solar panels - If you are willing to make a long-lasting investment to make your home more efficient for years to come, installing solar panels is one of the most effective ways of doing so. As much as the initial cost is estimated to be around £5000 for the average UK property, you can save up to £350 on your energy bills annually as a result. 

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