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What is a green mortgage?
A green mortgage offers prospective buyers of energy-efficient homes more favourable terms for this type of property. Lenders will often offer a lower rate of interest or cashback on a green mortgage, in order to incentivise buyers.
What is the qualifying criteria?
Every lender will have their own terms and conditions and maximum loan-to-values for this type of mortgage. Your property will need to meet a minimum level of energy efficiency to qualify. Most high street lenders will require the property to have an efficiency rating of 81 or higher or an Energy Performance Certificate (EPC) at bands A or B.
If you are looking to purchase a new build you should be provided with a Predicted Energy Assessment to provide a predicted energy rating. The majority of lenders may request to see this to check your eligibility for a green mortgage.
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What does the lender gain?
A lender is always taking a risk. A lender will generally offer a lower interest rate on more energy efficient homes because they believe lending on green buildings is less of a risk. There are a couple of reasons for this:
- The cost to run is lower, with your home being greener and more energy efficient your utility bills will be considerably lower, which means the chances of you being short on money is lower.
- Green properties are more valuable, they are considered more attractive than properties with no green features and are expected to hold their value, even if the property market takes a dip.
What are the downsides?
Some green mortgages are cheaper than non-green mortgages, most of the options are a little more expensive than a non-green mortgage. That’s after you factor in the rate discounts or cashback options.
We can compare any green mortgage to other mortgages across the whole market, that way you can make an informed decision about the deal that’s right for you, our team of mortgage experts can guide you through all your options and help you make the right decision.
Are green mortgages becoming more common?
Green mortgages are likely to become more common in the coming years as consumers and lenders are taking a greater interest in climate change.
Recent reports have suggested that lenders should consider reviewing their rules to help encourage consumers to go with green mortgages and offer additional borrowing and perks to help homeowners make green improvements.