Shane Frank talks all about green mortgages and what this might mean for First Time Buyers and home movers in the future.
What is a green mortgage?
A green mortgage is a way of a lender incentivising you to either purchase or remortgage a green property. A green property has either been built or had work done to achieve an energy performance certificate graded as A to C.
Are there many of these available at the moment?
They are becoming more popular and a handful of lenders have launched into the market. The main high street lenders that are launching green home mortgages are building societies, but they are becoming more and more prevalent. There’s a big Eco movement going on at the moment to make everything as energy efficient as possible, so they are steadily becoming more popular with lenders.
Is a Green remortgage available?
Yes, green remortgages are available. They’re not as popular as purchases at the moment, but again they are becoming more available as lenders move into the market.
Are green mortgages available to First Time Buyers?
Yes, they are available under the same criteria, based on the EPC energy performance rating. It’s important not to assume that all new builds apply automatically, however, as new builds can be a mix of energy efficient and not, but certainly the majority of them should be.
Can you get a green Buy to Let mortgage?
Absolutely, there aren’t many available as of yet, but there are some green Buy to Let mortgages. With the changes to regulations coming in 2025 whereby rental properties will also have to have an energy performance rating minimum of C, they are only going to become more popular.
Do many mortgage lenders currently offer green mortgages?
A few high street lenders have really good priced green mortgage options and as time goes on, more lenders will come to the market. Building Societies offer some good deals on energy efficient homes. There are some lenders that aren’t doing it yet, but even this year and next year, you’re likely to see more come to the market.
Are there any differences in the mortgage application process for a green mortgage?
The actual application process is the same, where lenders will look at your income, your debt and do an affordability check. The exception is with the property, it’s really important that your broker checks the energy performance of the property first, because that will be the first thing that lenders will look at for a green mortgage application. The process in itself is the same as any other mortgage.
Who’s eligible, how much can I borrow and what sort of deposit do I need?
Anyone’s eligible. Green mortgages are available for First Time Buyers, Buy to Let and remortgages. There’s no set criteria with the exception of the property. Terms vary from lender to lender, their affordability checks are all different, and it’s the same with deposit.
It’s worth having a conversation with your broker to see who the most suitable lender is, and what I will do as a broker is compare all the green mortgages and make sure we are getting the most suitable rate available and you are borrowing as much as you need to.
Are there any extra costs when it comes to green mortgages?
There are no costs involved, as such. There’s actually an incentive available when you take out a green mortgage. The lender may offer you cash back, or a better rate against a standard mortgage.
Do you think all mortgages will go green in the future?
I think they are certainly going that way and as green mortgages become more popular, I think we will see them overtaking standard mortgages eventually. A broker will need to make sure that we are comparing all the mortgages that are available on a green mortgage and make sure you’re getting the most suitable rate and lender for the property, whilst achieving a performance rating of A-C. I think all mortgages will eventually be green at some point in the future, because the government wants to lower emissions and making properties as energy efficient as possible is the only way to do this.
There are some properties that unfortunately won’t be able to meet that minimum energy performance rating of C, but if you are really concerned, once you’ve selected the property and we review it, we can see if this is an option for you. If you’re going to get a green mortgage it’s really important that you speak to us and we can help.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate some Buy to Let Mortgages.