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How to Benefit from a Green Mortgage as a Homeowner

Estimated reading time 6 minutes

With climate change concerns growing, many homeowners are seeking ways to reduce their carbon footprint while also saving money. One avenue gaining popularity is obtaining a green mortgage. This type of mortgage offers financial incentives for homeowners to invest in energy-efficient upgrades for their homes. But, as with all seemingly good ideas, green mortgages do have their pitfalls.

Through our guide below, we’ll explain green mortgages, how they work, and how homeowners could benefit.

What is a green mortgage?

A green mortgage, also known as an energy-efficient mortgage (EEM), is a type of home loan that incentivises energy-efficient upgrades. These upgrades can include installing solar panels, upgrading insulation, replacing windows with energy-efficient alternatives, or installing high-efficiency HVAC systems. The goal of a green mortgage is to encourage homeowners to make environmentally friendly improvements to their properties.

How does a green mortgage work?

The way a green mortgage works varies depending on the lender and the specific terms of the loan. In general, however, homeowners can expect the following benefits:

  • Lower interest rates compared to traditional mortgages
  • Higher loan amounts to fund energy-efficient upgrades
  • Energy savings for multiple utility bills
  • Environmental benefits by reducing carbon emissions

How could I get a green mortgage?

Obtaining a green mortgage is not dissimilar to the process of applying for a regular mortgage. The only caveat is you will need to complete an extra energy efficiency audit on the property.

The number of lenders offering green mortgages is much smaller than traditional mortgages. However, more and more lenders are starting to introduce green mortgage products.

Can I complete an energy audit of a property I am interested in buying?

If you’re considering buying a property with a green mortgage it’s recommended you conduct an energy audit of the home before going ahead with the purchase. You can schedule an audit via the seller’s estate agent at a convenient time. However, be aware that the seller could potentially be put off from selling to you due to the extra time taken to complete this audit. If they grant access for the energy audit your lender will be able to recommend a professional to assess the property’s energy performance and provide suggestions for improvement.

Can I get a green mortgage as a first-time buyer?

First-time buyers can purchase a property with a green mortgage if they meet the eligibility criteria. Many first-time buyers are attracted to green mortgages because they offer an opportunity to purchase a home and make environmentally friendly improvements. This can help reduce utility costs and align with the values and sustainability goals some first-time buyers may have.

Can I switch to a green mortgage?

If you currently have a traditional residential mortgage, it is possible to switch to a green mortgage. Contacting your current lender and asking if they offer a green mortgage would be a great place to start. If your current lender doesn’t offer green mortgages, you can research lenders that do. You will need to check the eligibility criteria carefully for each product and ensure you meet the requirements.

How can homeowners maximise the benefits of a green mortgage?

Now that we understand what a green mortgage is, how it works, and answered some key questions, let's explore some strategies homeowners can use to maximise the benefits:

  • The home energy audit will help prioritise upgrades and ensure the greatest impact on energy savings and carbon footprint
  • Not all energy-efficient upgrades offer the same return on investment and homeowners should focus on upgrades that make the most sense for the environment and their finances
  • Investigate additional incentives and rebates available via lenders and other initiatives to help drive down costs
  • Energy-efficient upgrades can increase the value of a property which could be beneficial for homeowners selling in the future
  • Whilst the upfront cost of energy efficient property upgrades may seem a lot initially the long-term savings can outweigh this cost
  • Working with an experienced green mortgage lender will help homeowners understand the product better and gain the most benefits
  • Homeowners can monitor energy performance following upgrades and make more improvements if required

Are there any pitfalls to be aware of with green mortgages?

Whilst green mortgages undoubtedly offer financial and environmental benefits there are some downsides and considerations to keep in mind. Currently, green mortgages aren’t widely available, and not all lenders offer such a product. Other hurdles include:

  • Stringent eligibility requirements
  • Higher initial costs
  • Time-consuming energy assessments
  • Interest rate differences
  • Potential limited resale market
  • Regulatory changes and uncertainty

Could selling a property with a green mortgage be more difficult?

Selling a property with a green mortgage can present some unique challenges, but it can also offer opportunities to appeal to environmentally conscious buyers and differentiate the property in the market. Being aware of potential challenges when it comes to selling is important. These can include:

  • Potential buyers may prioritise other features of a property above energy efficiency
  • Energy efficient features may not always be accurately reflected in a property’s appraisal value
  • Buyers may not be fully aware of the benefits of an environmentally friendly home
  • If the property requires further energy efficient improvements potential buyers may use this to negotiate on price

Can I move from a green mortgage back to a regular mortgage?

Generally, it is possible to move from a green mortgage to a regular mortgage. However, the process will vary between lenders, and you will need to check the terms and conditions of your green mortgage for any challenges.

Is a green mortgage right for me?

For individuals who are invested in sustainability and environmentally friendly practices, green mortgages offer an excellent opportunity. They can benefit from reducing their carbon footprint whilst also saving money on utility bills.

If you currently own an upgraded property with a green mortgage and are struggling to sell, get in touch with Bettermove today. We have helped homeowners with unique properties achieve the sale they want when other routes to sale are not working. As a cash house buyer, we have the funds to buy your property directly from you. Alternatively, we have a network of pre-approved investors ready to purchase your home from you who are interested in benefitting the environment. Fill in our online form or give the team a call today and discuss your property and how you’d like to proceed.