We all know we need to be greener โ using energy more efficiently, reducing emissions, and lowering our carbon footprint. The future of the planet, the climate, and our children may depend on it.
But being environmentally conscious often feels like it comes at a cost. An LED lightbulb, for example, uses far less energy but costs significantly more than its traditional counterpart. Energy bills are rising, and upgrading insulation or heating systems comes with a price tag.
However, thereโs one area when going green could actually save you money โ your mortgage.
What are green mortgages?
Back in 2018, the UK Green Finance Taskforce, commissioned by HM Treasury, recommended the creation of green finance products โ including mortgages โ to support national carbon reduction targets.
Green mortgages are lendersโ response to this challenge. They work like conventional mortgages but offer financial incentives such as reduced interest rates or cashback for choosing energy-efficient homes.
Eligibility for a green mortgage is typically based on your propertyโs Energy Performance Certificate (EPC) rating. All homes sold, bought, or rented in the UK must have an EPC, which assesses efficiency based on insulation, heating, and glazing. The average UK property is rated D; homes with an A or B rating may qualify for a green mortgage.
Two types of green mortgages
- For energy-efficient homes
These mortgages are available for properties that already have a high EPC rating (A or B). Lenders may offer interest ratesย ย which are lower than standard mortgages โ potentially saving you thousands over the term of your loan.
You donโt need a futuristic eco-home to qualify. Many new-build homes now meet the criteria. If you're buying off-plan, you can request a Predicted Energy Assessment (PEA) from the developer, which may satisfy a lenderโs requirements.
- For home improvements
If your current property doesnโt meet green standards, you may be eligible for a green home improvement mortgage. These offer incentives โ such as lower rates or additional borrowing โ if you commit to making energy-saving upgrades, like improved insulation, solar panels, or heat pumps.
This can help you reduce energy bills, lower your mortgage rate, and futureproof your home โ all in one move.
Are there downsides?
While green mortgages can offer savings, there are limitations. The criteria are strict, and only a small percentage of resale homes currently meet the necessary EPC ratings.
Home improvement green mortgages may not fully cover upgrade costs. For instance, a ยฃ2,000 cashback from Halifax for installing a heat pump is welcome โ but with installation costs often upwards of ยฃ7,500, thereโs still a significant financial outlay.
Is a green mortgageย suitable for you?
A mortgage that helps both your wallet and the planet sounds appealing. Many mainstream lenders now offer green options โ but that doesnโt mean theyโre always the mostย appropriate deal. Even if your property qualifies, itโs important to compare all options.
At Continuum, we take the time to understand your circumstances, your property, and the entire mortgage market โ green or otherwise โ to find the deal thatโsย suitable for you.
To explore your options, talk to us at Continuum today.
https://www.moneysavingexpert.com/mortgages/green-mortgages
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a particular mortgage product and you should seek independent financial advice before embarking on any course of action.
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