How a “Green” Home Could Lower Your Mortgage Cost
Homeowners of energy efficient homes could save hundreds of dollars by switching to a green mortgage – available from a growing number of lenders
Homeowners of energy efficient homes could save hundreds of dollars by switching to a green mortgage – available from a growing number of lenders. Borrowers who plan to improve their home’s environmental credentials may also be eligible.
Green mortgages are deals with special rates that are only available on properties with a high level of energy efficiency. They are designed to encourage people to buy an efficient home or to renovate a home that is drafty.
There are now over 25 green mortgages available – from big players like Virgin Money, Barclays and Nationwide, as well as smaller construction companies like Dudley and Saffron.
Economical: Green mortgages are agreements with special rates that are only available on properties with a high level of energy efficiency
The savings can be significant. For example, Barclays offers a green mortgage with a ten percent deposit, set for five years at 3.15 percent per year. His equivalent standard mortgage has an annual rate of 3.25 percent. The borrower would save £ 719 over the five-year deal on a £ 150,000 loan.
The Barclays Green mortgage is competitive with other non-green options in the market. Atom Bank, for example, has one of the best deals over five years at 3.19%.
While the Atom Bank deal generally requires a 10% deposit, it will only lend to new property buyers if they have a 15% deposit or 20% for new apartment buyers.
Nationwide offers cash back rebates to energy efficient home buyers on all of its mortgages. Homebuyers with a maximum rating for efficiency receive £ 500, while those with a very high rating receive £ 250.
Homeowners with low energy efficiency ratings could also get a green mortgage if they commit to making improvements.
For example, specialist lender Kensington has an eKo Cashback Mortgage, which pays out £ 1,000 to borrowers who improve the energy efficiency of their homes. Saffron Building Society offers a Retro Fit Mortgage, which offers a rate reduction if you can improve your home’s efficiency rating within six months of taking out the loan.
Some lenders also offer additional loans at a competitive rate to anyone looking to finance green improvements. Nationwide’s Green Supplementary Loan provides funding of up to £ 25,000 at an interest rate of 0.75% per annum.
The loan can be used to finance green projects such as installing solar panels, improving insulation, upgrading a boiler or installing an electric car charging station. The rate compares favorably to a personal loan, which would cost a minimum of 2.8% per year for a £ 25,000 loan over three years.
David Hollingsworth, mortgage broker at London & Country, says green mortgages are available to both homebuyers and rental investors and can be particularly beneficial for new construction buyers, who tend to have lower ratings. high efficiency.
However, he cautions that mortgages shouldn’t be chosen based solely on their green credentials, as there might be better rates available elsewhere.
“The loan market is so competitive right now that it’s very difficult for green mortgages to beat the rest,” he says. “But we need smart, affordable options to help people buy energy efficient homes or make improvements to their homes. Over time, green mortgages are only expected to become more competitive.
Certainly, the energy efficiency of UK homes will need to be improved quickly if the government is to meet its ambitious goal of achieving net zero carbon emissions by 2050.
Home heating accounts for around 14% of UK carbon emissions and two-thirds of homes across the country have a poor energy efficiency rating.
The Department of Business, Energy and Industrial Strategy says lenders can play a key role in getting borrowers to buy greener homes and improve the energy efficiency of existing homes.
However, Aaron Strutt, director of mortgage broker Trinity Financial, believes green mortgages will only be successful if they offer the best value to homeowners.
“Every now and then people ask us about ethical lending, but we don’t get people asking us about green mortgages,” he says. “People will always want the cheapest rate, the best loan amount, and the lowest application fees. “
OUR £ 15K LOAN FOR A WARMER HOUSE
Janice and Steve Macleod installed a new energy efficient air source heat pump last month thanks to a Nationwide deal.
Janice, 59, who works at her local NHS hospital, said: “We wanted to cut our heating costs and after our daughter bought a new house with a similar heating system we decided to investigate by ourselves themselves – we were so impressed with its warmth. ‘
The pump extracts heat from the outside air, even in cold weather. However, at £ 17,000 it was a costly expense. The couple, from Fort William in Scotland, took out an additional green loan of £ 15,550 from Nationwide, at a rate of 0.75% per annum over five years.
“The rate was so low he was crazy not to take it. It only costs us £ 300 in interest over five years, ”Janice adds.
The loan is significantly lower than their primary mortgage with the lender, which is set at 2.7% per annum.