Written by: Karina Gerdes - Group Head of Sustainability
A green mortgage is a type of loan that promotes energy efficiency, a reduced carbon footprint, and encourages ecologically responsible living. Unlike traditional mortgages, green mortgages provide a variety of perks designed to encourage homeowners to invest in energy efficient renovations, or to buy a green home.
Getting a green mortgage
Typically, you'll qualify for a green mortgage by living in or buying a property with a high energy performance certificate (EPC) rating. The qualifying EPC rating is A and B, but can sometimes include C. This rating reflects features like insulation, double-glazed windows, efficient heating systems, or even renewable energy sources like solar panels. You may already have some of these features in your home, so it’s worth taking a look and assessing your next move in ecologically responsible living.
Costs involved in energy efficient upgrades
Boosting your home's EPC rating is an appealing idea, but can be a costly venture. Upgrades like solar panels can be expensive. If you don’t have the budget to cover pricier upgrades, consider cheaper options such as energy-efficient appliances and smart thermostats. These offer more affordable ways to improve if you already have a decent EPC rating. Whilst these things may seem like small modifications, they can have a big impact on your EPC rating and money saved on energy.
For households that have previously never used smart thermostats, you can save an average of 31% on your heating costs. This may differ slightly based on your household usage. Using more energy efficient appliances can save you up to 30% on your annual energy bills and lift your EPC rating by up to 40 points, whereas solar panels have less of an impact on your EPC, raising it by up to 15 points.
Heat pumps
Heat pumps offer a more carbon-efficient heating alternative to traditional gas boilers, and provide your home with cleaner electricity. They work by taking heat at low temperatures from the ground or the air, heats it up further, and then use it to heat your home and your water.
These devices are some of the most expensive upgrades you can make to your property, with installation of air source heat pumps costing anywhere from £2,400 to £14,000. Additionally, ground source pump installation can cost between £13,200 and £49,000. Yearly running costs can range from £600 to £1,600, depending on the amount of bedrooms in your property.
Solar panels
Solar panels transform sunlight, a free and endless resource, into electricity for your home. After the initial installation cost, you'll be generating clean, renewable energy and saving money on your electricity bills.
Installation costs of solar panels can run between £5,000 and £8,000, and last for a lifespan of around 25 years.
Roof, loft, and cavity insulation
Insulation can be a very effective method of improving the energy efficiency, and therefore the EPC rating, of your property. It’s a simple process that involves adding the necessary thickness to your roof and loft walls. According to the government’s energy efficient home campaign, installation of roof and loft insulation can cost between £400 and £1,200. This kind of insulation can last for up to 42 years.
Cavity wall insulation is installed in the spaces between the inner and outer walls of your property. It keeps the valuable heat inside your home, retaining the warmth for longer and reducing the costs spent on energy bills. Installation costs of cavity wall insulation can cost between £1,000 and £3,000, and can also last for up to 42 years.
Other energy efficient upgrades
Other energy saving upgrades can also be made for quick wins across your property. One example is underfloor insulation. While there are a variety of ways your floors can be insulated, the average cost of installation, according to Checkatrade, is around £6,000.
Having single glazed windows can cause a lot of heat to leak from your property, and so refitting them with double glazing can be a great way of keeping that heat in. After all, that heat can be very pricey, you want to keep as much of it as possible! According to Checkatrade, the average cost of double glazing all the windows of a three-bedroom house can cost between £5,000 and £7,000.
Cost-saving measures
While these costs may seem eye-watering at first, there are plenty of cost-saving measures you can use to reduce the amount you pay.
Firstly, there are government initiatives you can take advantage of. For example, to get free or cheaper insulation, it may be wise to make use of the government’s Great British Insulation Scheme - an initiative put forward to adequately insulate insulation-poor homes.
If you’re after a heat pump but are left feeling cold by the steep cost, the government offers grants of up to £7,500 off the price of a heat pump. Find out if you qualify here.
If you’re in a property that would cost too much to retrofit to the point of being energy efficient, speak to a mortgage adviser about getting a green mortgage. Some green mortgage products offer lower interest rates (with some even offering 0% interest for the first few years of the loan) to incentivise borrowers to make green upgrades to their home. Other green mortgage products incentivise the purchase of green homes.
Can I afford a green home?
It all depends on your circumstances and wants. When you take into account all the money saved through making your home more energy efficient, green homes can potentially be affordable, especially if you make use of a green mortgage product or a government initiative.
If you’re interested in financing energy efficient upgrades for your home, or would like to purchase an already efficient home, talk to one of our expert mortgage advisers about green mortgages today.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
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