| Introduction | | | | green mortgage it sells and other lenders say |
| As Green issues increasingly play on people's mind | | | | they will plant one tree for each year you have |
| the desire to renovate defunct properties or build | | | | the mortgage. |
| eco-friendly properties is growing. Mortgage | | | | As concerns over climate change grow there are |
| lenders, who typically steered away from such | | | | expected to be more and more lenders offering |
| projects, now recognise a growing market and | | | | green home loans. The government is also |
| many more are now willing to loan money to fund | | | | launching various incentives for borrowers looking |
| such projects. This article discusses the rise of | | | | to improve the energy efficiency of their homes. |
| the Green Home Loan and the complexities | | | | Brokers warn that homeowners should be wary |
| surrounding it. | | | | of just how much of what is offered on green |
| Green Mortgages | | | | loans is a sales gimmick and how much of it is |
| Only a handful of specialist lenders are offering | | | | actually a tangible benefit. Some brokers advise |
| green home loans. These can either be loans that | | | | that people looking to take out a loan on a |
| offer environmentally friendly perks, such as free | | | | conventional property might want to take out a |
| energy savings reports, carbon offsetting and | | | | more competitively priced standard loan and then |
| cash back for energy saving home improvements | | | | donate to a carbon offsetting scheme on their |
| or those that fund large scale renovations of | | | | own. Unfortunately, if your dream home is |
| disused buildings and energy efficient new builds. | | | | unconventional like a log cabin, then you are more |
| For larger projects people will still have there | | | | or less forced to go to one of the companies like |
| hands tied as to where they can go for a loan, | | | | Ecology. Ecology has a range of mortgages, |
| but companies such as Ecology are happy to | | | | including buy-to-let and interest only deals and for |
| offer loans on smaller projects that other lenders | | | | properties that have a commercial element or |
| won't offer mortgages on. It will offer loans on | | | | loans to buy woodland that the buyer wants to |
| log cabins or timber chalets and properties built | | | | preserve. At the time of writing, interest rates |
| using traditional materials like straw. It also offers | | | | for residential mortgages start at 6.15% and for |
| loans to develop rundown houses, unused | | | | buy-to-let at 6.4%. Ecology also offers discount |
| churches or derelict buildings. In the past the | | | | from its standard rates if people are taking out |
| company has been known to fund projects to | | | | the home loan to increase the energy efficiency |
| develop disused lighthouses, chapels, coast houses, | | | | of their property. Borrowers can get a 1% |
| water towers and barns. | | | | discount if they are doing things like modifying the |
| One of the problems though of going to such | | | | floor, wall and roof to improve energy efficiency |
| companies, is that as they are dealing with niche | | | | or if they are installing low water-usage appliances. |
| loans, they will typically charge a higher rate of | | | | The way some of the Ecology schemes work is |
| interest than for those found in traditional | | | | to offer an initial loan amount to fund the start of |
| mortgages. Another problem is that companies | | | | a project, which is based on the value of the |
| offering green mortgages often find it difficult to | | | | property or planning permission and then, as the |
| carry out surveys or valuations. The lenders also | | | | building work progresses, to reassess the |
| find it difficult to establish whether they could | | | | property's value and to issue further funds |
| resell the property in the event of payments | | | | accordingly. There is an interesting array of |
| defaults and subsequent repossession. | | | | sustainable and recycled materials used in the |
| Recognising the growth in the market though, | | | | developments Ecology has funded. These have |
| other companies like Norwich and Peterborough | | | | included material such as timber, straw, cob, |
| are now offering their own flavour of niche green | | | | rammed earth, reclaimed brick and stone. Some |
| mortgages. These companies offer green loans | | | | of the properties and even underground or built |
| on new and existing homes with higher than | | | | into the side of hills, while others may incorporate |
| average standards of energy efficiency or | | | | good insulation, triple glazing, efficient boilers and |
| existing homes that buyers plan to make more | | | | renewable energy systems such as solar panels |
| environmentally friendly. Norwich and | | | | and rainwater collecting systems. |
| Peterborough's green loans come with free | | | | Most green mortgages are only offered for up to |
| energy rating surveys and perks such as cash | | | | 90% of the property's value, but are offered on |
| back that can be used to improve the energy | | | | part-commercial, part-residential schemes like |
| efficiency of the home. | | | | working farms. It is very rare for a green home |
| Some lenders also have other sales gimmicks on | | | | loan to be offered at a fixed interest rate, or for |
| their green loans, for example Norwich and | | | | holiday and second homes. |
| Peterborough say they plant 40 trees for each | | | | |