While still relatively new in the mortgage market, green mortgages are designed to encourage homeowners to make their homes as energy-efficient as possible. They do this by offering small financial perks for customers with Energy Performance Certificate (EPC) ratings of A or B.
EPCs measure the energy efficiency of a home, with ratings ranging from A – the most energy efficient – to G – the least energy efficient. Having a high EPC rating generally means lower energy bills, and of course a reduced carbon footprint. When properties are listed for sale, they must by law display their EPC rating. However, some properties, such as homes which are listed, do not have to provide an EPC.
If you’re eligible for a green mortgage, a lender might offer you a lower standard interest rate on your mortgage for the duration of the loan. Don’t dismiss it if the percentage difference looks small – when it comes to accumulating interest, even a small reduction can go a long way over the years. A lender might also increase the amount they are willing to lend you, or provide cashback when your mortgage completes.
Green mortgages aren’t restricted to just standard mortgages. It’s also possible to get green lifetime mortgages, remortgages, or buy to let mortgages.
Lifetime mortgages are equity release plans, designed for homeowners who want to unlock some of their property wealth, whilst remaining in their property for the rest of their life. Rather than making monthly payments as you would with a standard mortgage, the interest you owe builds up over time and is only paid back, along with the capital, when you either die or move into long-term care.
While a lower interest rate from a green lifetime mortgage might not end up benefiting you directly, it could well make the difference of a few thousand pounds left in your estate after the loan is paid off, and this could go to your beneficiaries. You can read more about lifetime mortgages in our article Equity release – what is it and how does it work?