Getting a mortgage

What are green mortgages and how do they work?

3 min read

Green mortgages offer incentives to energy-conscious home buyers and owners and are becoming an increasingly popular sustainable finance option. Find out more about what they are and the benefits.

Abigail Bolton
SEO Specialist and Senior Copywriter
Published April 22nd 2024

sustainable house with solar panels bought using a green mortgage

Getting a mortgage

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Getting a mortgage
What are green mortgages and how do they work?

Green mortgages are loans that offer better terms to those who buy energy-efficient homes or make eco-friendly home improvements. These terms can include lower interest rates, reduced fees and cashback.

In this article:

How do green mortgages work?

The way green mortgages work varies between property types, mortgage lenders and mortgage products. However, the core value remains the same: borrowers are rewarded for making environmentally conscious decisions.

There are 3 main types of incentives lenders offers through green mortgages, these are:

Preferential interest rates - many lenders offer cheaper interest rates with their green mortgage products.
Cashback - other mortgage products may offer you cashback when green improvements have been made to your home.
Loan or grants: some lenders offer a loan on top of your mortgage to make efficiency improvements to your home.

How can you get a green mortgage?

Each lender will have their own criteria and own specific incentive. However, in all circumstances, eligibility is based on the current, or future, energy efficiency of a property.

Most green mortgages are only available on houses which have an energy performance certificate (EPC) rating of A or B, or 81 and above. Some green mortgages are available if you’re making home improvements to increase the EPC rating to a B or higher.

You may also be able to get green mortgages for eco-conscious new-builds when buying directly from the developer or builder.

How do you apply for a green mortgage

The application process for a green mortgage is mostly the same as a standard mortgage. Learn more about the mortgage application process. For green mortgages the biggest difference will be for those wanting to use the green mortgage to make energy-efficiency improvements, where it’s likely you will have to provide a plan to your mortgage provider of how these improvements will be made.

What are the benefits to green mortgages?

There are several benefits to green mortgages for both buyers and the environment:

Financial incentives: you can enjoy financial incentives from lenders such as preferential interest rates, lower monthly repayments, and cashback.
Energy efficiency: as you will be buying a home that is energy efficient, or making your home more energy efficient, energy bills are more likely to cost less, helping you save money on bills while also reducing your carbon footprint.
Increased property value and value longevity: eco-friendly homes are often seen as more desirable and potentially have an increased property and resale value. As the world becomes more eco-conscious this could have an even bigger impact in years to come.
Eco-friendly: by incentivising energy-efficient housing and eco-friendly renovations, green mortgages contribute to reducing greenhouse gas emissions and promoting sustainability.

What lenders offer green mortgages?

Although green mortgages aren’t widely available yet, it’s likely they will become more popular in the years to come. Currently some of the biggest high street lenders, such as Barclays, Natwest and Nationwide have green mortgages available as well as some building societies.

How can you make your home more energy efficient?

Your EPC not only shows you the energy rating of your home, however, it also shows ways improvements can be made. This will include things such as, improving the loft insulation, installing double or triple glazed windows and updating to a modern and more efficient boiler. You could also install solar panels as a way to generate your own energy,

Find more ways to make your home more energy efficient in our guide.

Green mortgage FAQs

Can you get green mortgages for buy-to-let properties?

Yes, many of the lenders also offer green mortgages for buy-to-let and holiday let properties. Read our guide to buying a second home.

Can you get a green mortgage when remortgaging?

Yes, in most circumstances green mortgages are available to first-time buyers, home movers and remortgages, as long as the property meets the specified criteria.

Are green mortgages worth it?

One of the main benefits of a green mortgage is that they offer better interest rates. If this is your main reason for opting for a green mortgage, you should also consider alternative options as different providers may offer cheaper interest rates through other products. You should speak to a mortgage adviser if you are unsure.

What other incentives are there to improve the energy-efficient of a house?

The government offers various incentives and grants to improve a homes energy efficiency, such as the Boiler Upgrade Scheme and the Energy Company Obligation. You can find about these and more in our guide on how to make your home more energy efficient.