The Mortgage which rewards homeowners or buying an eco friendly property.
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Green Mortgages for energy efficient homes
According to an Ipsos Mori poll, 85% of UK Citizens are either concerned or very concerned about climate change, source.
Concerns over the environment has lead to a greater thought into how we can all make a positive impact, from recycling more and shifting from Diesel to Electric Cars.
The property market is no different and lenders have been working behind the scenes to see how they can encourage home owners to either improve the energy efficiency of their homes, or encourage would be buyers to consider energy efficient homes.
The answer from Lenders. Green Mortgages.
What is a Green Mortgage?
A Green Mortgage is a product offered by Lenders which provides a financial incentive for owning or buying a property which is energy efficient.
For example a lower interest rate than their other comparable products and/or a cashback payment.
The most common reward is a cashback payment of between £250-£500.
This is usually measured by the properties Energy Performance Certificate (EPC) rating:
How can I get a Green Mortgage?
Firstly, speak to a Mortgage Broker who will ask you some eligibility questions about the property you are buying.
In most cases the property you are purchasing will need to have an EPC rating of A or B and if it does, this will satisfy the requirements of most lenders.
Most Green Mortgage rewards will then be in the form of a Cashback payment of between £250-£500.
Benefits of buying an energy efficient property
Green Mortgage rewards: A reward from lenders who offer Green Mortgages.
FT Adviser reported that 77% of Lenders offer or expect to offer Mortgages which cost the same or are cheaper than standard Mortgages.
Attractive to potential buyers
Top 5 Green Mortgage Lenders in the UK
Some of the main Green Mortgage Lenders are:
Lloyds Banking Group – Lloyds/Halifax
Dudley Building Society
Other Lenders are available, and more are due to be announced in the future.
How much will I be able to borrow?
Mortgage Lenders will assess your borrowing capacity in the same way as they usually would, by assessing your Income and your Outgoings.
Your maximum borrowing will usually be capped at 4-5 times your income on Green Mortgages.
What Mortgage Repayment options will I have?
A Capital and Interest Repayment Mortgage will likely be the only option available to you.
A Capital & Interest Repayment: This is where you repay your Mortgage balance as well as the interest to the Mortgage Lender.
Providing you keep up with repayments you are guaranteed to have repaid your Mortgage by the end of the term.
The other usual option is Interest Only.
This is unlikely to be an option, as Mortgage Lenders consider Interest Only to be a much higher risk to borrowers than a repayment Mortgage is.
What types of Mortgages will be available?
The main types of Mortgages that will be available on the Help to Buy Mortgage Guarantee Scheme will be:
Fixed Rate Mortgage: Simply put, this is where your Mortgage is fixed for a certain period of time, usually for 2 to 5 years.
The rate is best to be thought as fixed for you and the Lender.
As during this time your interest rate is guaranteed not to change. And you are unable to leave the Mortgage early without paying a fee to the lender for doing so.
Variable Rate Mortgages: Where your interest rate can vary. You will usually have a set interest rate which can fluctuate throughout the term.
The interest rate will usually change in line with the Bank of England base rate, although it doesn’t have to.
Tracker Mortgages: Where your interest rate will track a certain index, usually the Bank of England Base rate.
When the Base rate changes, so will your Mortgage rate.
What documentation will I need to provide the Mortgage Lenders?
What documentation is required for the Mortgage, will vary between Lenders.
Mortgage Lenders will usually need to verify your identity, as well as your income and outgoings.
To do this they will require the following:
Payslips for Employed Applicants or Accounts/Tax Calculations and corresponding Tax Year Overviews for any Self Employed Earnings.
Up to 3 Months Bank Statements to evidence Earnings and Outgoings.
Identification to prove your Name and Address.
What costs will I need to consider?
Lenders Arrangement/Product fees: A fee the lender will charge for arranging your Mortgage.
In general, the higher the Arrangement fee the lower, the Interest rate.
Most, if not all lenders, will also provide a low/no fee option and charge a slightly higher rate as a result. These fees tend to be between 0-£999.
Broker fees: this will depend on how complex your case is. For example, whether you have any adverse credit.
To find out exactly what it could cost, get in touch with on of our Mortgage Brokers for a free non-obligatory quotation.
Solicitors fees: for an ordinary house purchase, you can expect to pay anywhere between £1,000 and £1,500, so its important to shop around.
Always check out their Reviews before choosing a Solicitor. They’re a very important cog in the house buying process.
Stamp Duty: If you are a first time buyer in England, it is unlikely you will pay stamp duty if your property is valued less than £500,000.
For non first time buyers, Stamp duty will be due on properties worth over £125,000.
Mortgage Valuation: The Mortgage Lender may charge a fee to complete a basic valuation on your property during the application process.
This will be between 0-£250. But could be more if you need to use a specialist lender, if you have adverse credit for example.
Survey fees: You may choose to carry out a more thorough assessment on your property.
The most common, being a Homebuyers report, which will cost between £300-£500.
Full Structural report, if needed, will cost in excess of £600, however these are rarely necessary.
Compare Green Mortgages
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When you get in touch, simply select the reason why you’re getting in touch i.e. First time buyer, Bad Credit, Remortgage etc. And we will match you to the Mortgage Broker which Specialises in your circumstances.
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