First, let’s clarify what a green mortgage isn’t. It isn’t a loan backed by environmentally friendly funds or where some of the profits are invested in sustainability or renewable energy.
The green element of these mortgages ties into helping to improve a home’s energy efficiency rating. There are three broad types of green mortgages:
- Cheaper lending rates for homes with high energy efficiency ratings.
- Capital release to pay for improvements to a home’s energy efficiency through credit, discounted mortgage rates, or cashback on an existing mortgage.
- Additional borrowing made available for home energy efficiency improvements through re-mortgaging or moving to a new home that may benefit from energy efficiency work.
Each type aims to reduce a home’s carbon footprint and help homeowners recoup any investment by saving money on energy bills. A good energy performance certificate (EPC) rating could even help your property’s value increase, as it can be an indicator of lower running costs.