In the UK, there’s a growing buzz around “green mortgages” and for good reason. These initiatives are designed to encourage homeowners to make eco-friendly choices and home energy improvements, reducing your carbon footprint whilst also saving you money on energy bills.

Surprisingly, most people are unaware that they may already have a “green mortgage”!

Green mortgages are available for both first-time buyers seeking energy efficient residencies and for current homeowners aiming to implement green home upgrades. Plus, the long-term savings on energy bills can offset the initial costs of these improvements, making green mortgages a financially sound decision. But how do they work and how much can you save?

What is a green mortgage?

Green mortgages are specialised home loans that are becoming an increasingly popular way for homeowners to finance energy-efficient home improvements and new builds. These mortgages also typically offer attractive benefits to borrowers such as lower interest rates, reduced fees or cashback offers and rewards.

There are two types of green mortgages, the first type are EPC-rated mortgages that offer those buying or living in a property with a high energy performance certificate (EPC) rating of A or B a cheaper interest rate on your mortgage, cashback or a cheaper fee.

The second type of green mortgage is available for homeowners who are renovating existing properties to improve their energy efficiency. These mortgages may provide additional borrowing funds or cashback offers for energy-efficient upgrades. By investing in these upgrades, homeowners can greatly increase the value and comfort of their homes.

What are the benefits?

One of the most compelling benefits of green living offers is their capacity to significantly lower energy expenses. Homeowners who utilise these green mortgages and install solar panels, air source heat pumps, battery storage, or make other green home upgrades can substantially decrease their monthly energy bills.

Most high-street mortgage lenders also have other appealing incentives for these green mortgages. Some offer cashback rewards of up to £2,000, better interest rates and even higher borrowing amounts.

Nationwide, for example offers £500 cashback for buying energy-efficient homes with an EPC rating of A or B, and the Nationwide Green Additional Borrowing mortgage offers 0% interest loans for up to 5 years (between £5,000 and £20,000) for eco-friendly home improvements.

Who’s Eligible & How to Apply

Generally, there are two ways to qualify for a green mortgage. The first is to be buying or currently living in an energy-efficient home, with an EPC rating of A or B. However, sometimes, this type is restricted only to homebuyers or to new-builds specifically.

The second is to simply be making energy-efficiency home improvements. But with this type, it’s usually required that you have a mortgage with that lender already for them to offer the desired incentives.

To apply for a green mortgage, first you’ll need to check your EPC rating, find a lender that you meet the eligibility criteria for and apply directly through their bank, either online or in-person. We’d recommend looking around at multiple lenders before committing to one, as you’ll want to choose an offer that works for you.

If you already have a mortgage and are considering making some home improvements, look to see at what your mortgage provider is currently offering as incentives for these.