Make your home greener using a mortgage
How to make your home greener using a mortgage.
Making your home more energy-efficient and eco-friendly is one of the best ways to reduce your environmental impact, save on energy bills, and increase your property’s value. However, many homeowners believe that going green requires significant upfront investment. What if you could use your mortgage to finance these green upgrades instead? The good news is, there are several ways to use your mortgage to fund sustainable home improvements in the UK. From specialised green mortgages to using your home’s equity, here’s how you can use a mortgage to make your home greener.
- Green Mortgages: Financing Sustainability from the Start
In the UK, there are specific mortgage products designed to help homeowners fund energy-efficient upgrades. Known as green mortgages, these loans allow you to borrow additional money to make your home more eco-friendly while benefiting from lower interest rates.
Green Mortgage Products
Lenders offer green mortgages that reward homeowners for making eco-friendly improvements. Green mortgages typically come with lower interest rates or offer larger loan amounts, provided you commit to making your home more energy-efficient. Some lenders even offer better terms if the property you’re buying already has a high energy efficiency rating.
For example, Lenders offers a Green Mortgage products, which is designed to help homeowners buy energy-efficient properties or improve an existing property’s energy efficiency. With this type of mortgage, you may qualify for a discounted interest rate, or a larger loan based on the energy savings from the improvements.
Energy Performance Certificate (EPC) Rating
To be eligible for a green mortgage, your property typically needs to have a good EPC rating (Energy Performance Certificate). A property with an EPC rating of A or B shows that it’s energy-efficient, and this is a key requirement for green mortgage schemes. If your home is below this rating, you may need to invest in improvements, such as insulation, energy-efficient windows, or a more efficient heating system, before you qualify for a green mortgage.
- Use a Remortgage or Further Advance to Fund Eco-Friendly Upgrades
If you already own a home, refinancing your current mortgage or taking out a further advance can be an excellent way to access funds for energy-efficient improvements. By remortgaging or securing a further advance, you can take advantage of lower interest rates or extend your loan term to make room for green upgrades in your home.
Cash-Out Remortgage for Green Improvements
A cash-out remortgage allows you to release equity from your property by remortgaging for a higher amount than your current loan. The extra funds can be used to pay for eco-friendly improvements, such as installing solar panels, upgrading your insulation, or adding energy-efficient heating systems.
Given the UK government’s commitment to reducing carbon emissions, there are also grants and incentives available for certain types of green home improvements. You may be able to combine a cash-out remortgage with these incentives to fund your eco-friendly projects more affordably.
Further Advance on Your Mortgage
Alternatively, you could apply for a further advance, which is essentially an additional loan on top of your existing mortgage. This allows you to borrow extra money for home improvements, including green upgrades, at the same interest rate as your original mortgage or a slightly higher one, depending on your lender’s terms.
The advantage of a further advance is that you don’t have to refinance your entire mortgage. Instead, you can add extra borrowing to your current loan, which may result in lower overall costs compared to personal loans or credit cards for home improvements.
- Government Schemes and Incentives for Green Home Improvements
The UK government offers a range of schemes and incentives to encourage homeowners to make their homes more energy-efficient. While these schemes are often separate from your mortgage, they can be used in combination with your mortgage financing to make green upgrades more affordable.
Green Homes Grant (and Other Current Schemes)
The Green Homes Grant scheme was a government initiative that provided vouchers to homeowners for energy-efficient upgrades, including insulation, heat pumps, and energy-efficient windows. Although the Green Homes Grant is no longer available, there are still various local schemes or funding options that can help with the costs of making your home more sustainable. Be sure to check for new government-backed green schemes, such as Local Energy Advice Programmes or Energy Company Obligation (ECO).
Energy Company Obligation (ECO)
Under the Energy Company Obligation (ECO), large energy suppliers are required to fund energy-saving improvements for eligible households. This can include free or subsidised insulation, boiler upgrades, and other energy-efficient home improvements. If your home is eligible for ECO funding, you may be able to use it in conjunction with your mortgage or remortgage to make your home greener.
- Make Green Energy Investments with Your Mortgage
A green mortgage can also help you finance renewable energy systems in your home. By adding solar panels, a heat pump system, or wind turbines, you can reduce your reliance on fossil fuels, lower your energy bills, and make your home more sustainable.
Solar Panels and Energy Storage
Solar panels are one of the most common green upgrades in the UK. Using a green mortgage or a further advance to finance the installation of solar panels allows you to reduce your electricity bills and take advantage of feed-in tariffs or export schemes. You could also consider adding an energy storage system, like a home battery, which stores excess solar energy for use when the sun isn’t shining.
Some green mortgages or further advance options may even allow you to include the cost of installing solar panels or other renewable energy systems in your loan, enabling you to pay for these upgrades over time with your monthly mortgage payments.
Heat Pumps
Air-source or ground-source heat pumps are a highly energy-efficient alternative to traditional gas boilers. They work by extracting heat from the air or ground and transferring it into your home. While heat pumps can be costly to install, using your mortgage or further advance to cover the cost can make the investment more affordable. Many homeowners find that heat pumps can significantly reduce their heating bills over time, making them a worthwhile investment.
- Increase Your Home’s Value with Green Improvements
Not only can a green mortgage help you save money on energy bills, but it can also increase your home’s value. As the demand for sustainable living continues to rise, many buyers are prioritising homes with energy-efficient features.
Improved Resale Value
Properties with green features, such as solar panels, high-efficiency boilers, and good EPC ratings, often have higher resale values. If you plan on selling your home in the future, green upgrades can make your property more attractive to buyers, potentially leading to a quicker sale at a higher price.
Long-Term Savings
Many green improvements have long-term savings that make them a financially savvy choice. By reducing your energy consumption and making your home more comfortable year-round, you can enjoy lower utility bills while boosting your home’s marketability.
- Consult with a Mortgage Advisor Specialising in Green Loans
Before committing to a green mortgage or further advance for eco-friendly improvements, it’s a good idea to consult with a mortgage advisor who specialises in green loans. They can help you navigate the best options for your circumstances, identify available government grants, and ensure you’re choosing the right financing route for your home’s green upgrades.
Conclusion
Using a mortgage to make your home greener is a fantastic way to reduce your environmental impact while improving your home’s efficiency and comfort. Whether you’re purchasing a new property, remortgaging, or taking a further advance on your existing mortgage, there are many options available in the UK to help you fund eco-friendly upgrades. From green mortgages to remortgaging and government incentives, the financial tools are there to help you create a sustainable home. So, why not take the leap and start making your home greener today? Your future self—and the planet—will thank you for it.