What are Green Mortgages?

Energy Efficient Mortgages Aim to Reduce Impact on the Environment

Jul 24, 2009 Fleur Hupston

The public are becoming more aware of impact of global warming. Certain mortgage lenders are using some of their profits to support the environment in a positive way.

Is this just another sales gimmick, or can it really be that big business is concerned with being kind to the environment? The latter is true- some mortgage lenders have really taken the initiative in a drive to benefit the environment.

Also called energy-efficient mortgages, these mortgage lenders allow home buyers to qualify for larger loans on the premise that they can afford higher monthly payments due to what they save on heat, water, and other utilities.

The government in the UK is also offering low interest green mortgages to fund the installation of solar panels, UPVC windows and other energy saving devices.

How do Green Mortgages Support the Environment?

There are five mortgage companies in the UK who offer a green mortgage package, all five of them support reforestation schemes. One of the five, The Co-operative Bank, make a direct donation to Climate Care, which is a charity that invests in off-setting carbon emissions. The Co-operative Bank also provides a free Home Energy Report with their green mortgage loans valuations.

Another mortgage company, London & Country Green Mortgage, pledges to plant 50 trees every time someone takes out a mortgage with them. Other lenders will lend on properties that are energy efficient or built with sustainable materials.

Does a Green Mortgage Save Money or is it More Expensive?

This depends on the broker chosen, individual circumstances and the type of loan that will be taken out. Green mortgage lenders are generally competitive. An alternative to choosing a green mortgage lender is to take out the cheapest loan available and donate to green charities or projects instead. It is always best to compare rates, prices, repayments etc, a reputable mortgage broker would be able to find the best deal. Always read the fine print and exclusions on any contract carefully before signing.

Government Pledge to Reduce Carbon Emissions

According to The Guardian newspaper, Britain has pledged to reduce carbon emissions by 80% between now and 2050. Article "The Guardian, Article Green Politics", Deborah Summers, Thursday 16 October 2008. Green mortgages are expected to be made available by mortgage lenders in partnership with local councils.

Householders may be encouraged to take out loans by a temporary reduction in council tax, which may also be increased if they refuse. Article "Green Mortgages to Foster Energy-Saving Homes", Thomas Davies, Monday 13th July, 2009

The loans, likely to average between £10 000 and £15 000 for each home would be secured by a charge on a property, repayable over periods up to 20 years.

Ute Collier of the Committee on Climate Change, the government’s independent adviser, calculated that the owner of a typical three-bedroom Victorian end-of-terrace home, with three exposed walls, could expect to spend £10,280 on a package of energy-saving measures which could include replacing the wooden frame windows with energy efficient UPVC windows and a new boiler. Article "UK to Offer Cheap Green Mortgages to Foster Energy-Saving Homes", Jonathan Leake, Sunday Times, July 12, 2009

This would cost the householder £514 a year in repayments over 20 years, assuming a zero interest rate, while the savings on energy would total £802, a yearly 'profit' of £288.