What Are Green Mortgages And How Its Work
Do you know what green mortgages are? How do green mortgages work? So in this article, we will discuss a complete guide on green mortgages.
What Are Green Mortgages?
Let’s start by defining what a green mortgage isn’t. It is not a loan backed by green investments or where an amount of the profits are invested towards durability or sustainable sources. Green mortgages are divided into three main categories:
- Lower interest rates for mortgages on properties with high energy ratings.
- Credit, mortgage rates below market, or cash back on an existing mortgage may be used as capital release to pay for energy efficiency upgrades to a home.
- Remortgaging or moving to a new property that could benefit from energy efficiency work opens up more borrowing options for home energy-efficiency upgrades.
Each type aims to reduce a house’s carbon footprint and help owners recoup any investment by lowering their energy costs. As a sign of decreased operating costs, a high energy performance certificate (EPC) rating may even help your property’s worth rise.
Benefits of Green Mortgages:
The benefits of a green mortgage for the buyer come down to cost savings, whether in the form of a lower rate or cashback. However, these mortgages can also allow homeowners to undertake energy-efficiency improvements to their homes, which may cut their energy bills (further cost savings), be better for the environment, and help the UK achieve its goal of having net zero emissions by 2050. Additionally, by improving your home’s energy efficiency now, you may increase its future resale value.
How Do Green Mortgages Work?
Lenders consider household spending, which includes energy costs when considering mortgages. Most lenders estimate a typical energy cost as 4.4% of a household’s total spending, which can sometimes produce unreliable results.
For example, a family of four renting a “G” rated home would pay £200 per month in fuel expenses. However, if they reside in an “A” rated property, that amount lowers to £50 per month.
Green mortgages consider EPC ratings and their effect on energy usage. Because less money is spent on energy and more money is available for mortgage payments, people purchasing “A” or “B” rated homes may be able to borrow more.
As per studies, increasing a home’s EPC efficiency by two bands could result in a £4,000 increase in mortgage financing because of the monthly fuel bill savings.
Lenders offer lower interest rates to promote home energy efficiency, enabling borrowers to take out loans to pay for upgrades that decrease their energy costs.
While some reductions are only valid once the project is finished, others require that a predetermined portion of the funds be used for energy efficiency improvements. Some demand that the house achieves a certain EPC rating after finishing the work.
According to a mortgage broker in London, most significant house improvements are made during the first year of ownership. Energy efficiency is put front and centre in both the lender’s and the buyer’s minds when considering a green mortgage that offers lower interest rates or additional money.
Mountview Financial Solutions, a professional mortgage broker in London, can help with your search for a mortgage, especially if you’re looking for a more specialised arrangement. They let you access special schedules and rates that aren’t available to the general public and take a lot of the paperwork and hassle out of getting a mortgage. They’ll know the lenders who can offer green mortgages – and, importantly, those who would best suit your circumstances. Before they can provide you with advice, mortgage brokers must complete a series of tests monitored by the Financial Conduct Authority (FCA).