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Green home loans
A Guide to Green Home Loans

Green home loans, also known as energy efficient home mortgages or green mortgages are loans which have been created to reduce our negative impact on the environment. At present, green home loans are only available through a few mortgage providers in the UK. However, as global environmental issues become more pressing, an increasing number of people are growing more aware of green home loans and asking about their benefits.

What are green home loans?

An energy efficient home mortgage is a home loan with specific aims to benefit the environment. Here are just some ways that green mortgages contribute to improving our environment:

  • Some lenders donate a percentage to environmental and other charities.

  • Some lenders only offer mortgages to buyers who purchase environmentally-friendly houses.

  • Some lenders refuse to do business with companies that have a poor environmental record.

  • Some lenders organise schemes to plant a certain number of trees for every green mortgage they provide, thus helping to offset its carbon footprint.

  • Some lenders support reforestation programmes.

Where to go for green home loans?

Some main lenders that offer energy-efficient home mortgages include:

  • The Co-operative Bank

  • The Norwich & Peterborough Building Society

  • The Ecology Building Society

Here are just some of the main ways these green mortgage lenders contribute to the environmental cause:

  • The Co-Operative Bankis in partnership with Climate Care and offsets 20% of an average home's carbon dioxide production for every green mortgage granted.
  • The Norwich & Peterborough Building Society manages tree-planting schemesto create new forests. The company offers a £500 rebate to green customers to them make energy efficiency improvements to their homes.

  • The Ecology Building Society promotes sustainable housingand communities, and will only offer finance to properties that provide an environmental benefit. It provides energy efficient home mortgages and finance to make derelict properties more energy-efficient, and offers funding to households to install renewable systems.

Some lenders offer the following financial incentives to encourage more buyers to take on energy-efficient home mortgages:

  • Lower mortgage rates

  • Cashback

  • No early repayment charge

  • Penalty-free packages

  • Higher loan to value

  • More favourable length of term

Points to consider before taking on a green home loan

  • Think about your personal environmental principles and priorities, then choose a green home loan mortgage lender which shares your ethics most closely.

  • Think about how you would like to contribute to helping the environment; do you favour donations or tree-planting schemes?

  • Lastly, choose a green mortgage interest rate payment that suits your needs and budget.

Essential information about green home loans

  • Some green mortgages are generally more expensive than a standard mortgage. However, if you are undertaking the renovation of a 'green project' such as developing a derelict property, taking out a green mortgage can be a good option.

  • You may need to have your home assessed to qualify for a green mortgage. With certain energy-efficient home mortgages, only borrowers with a high energy-efficiency rating, based on a Standard Assessment Procedure, will qualify.

  • You may have to make a minimum advance with green mortgages.

How effective are green home loans?

Energy-efficient home mortgages can be effective for the buyer and they certainly have benefits for the environment:

  • With green home loans, you will save hundreds of pounds on utility bills on an annual basis even with simple changes such as insulating your loft or using energy-saving light bulbs.

  • You can take out certain green mortgages where your household emissions and energy usage is closely monitored. This will help you and your family be more aware of your energy use. It may help you to reduce your energy consumption and consequently, cause less damage to the environment. 

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