Q. I’ve recently completed home improvements and brought my family home up to a BER rating of B2. I now have a mortgage and a home improvement loan and was looking to combine them to reduce my outgoings. I’ve heard about Green Mortgages. Should I get one and is it worth it?
Anyone fortunate enough to be living in or buying a home with a building energy rating of B3 or more should definitely look at a green mortgage. Lenders offer attractive rates to the owners of homes with an A or B rating for energy efficiency. The best fixed rates in the market at the moment are Green fixed rates.
Green mortgages are available to first-time buyers and to movers and switchers when a home’s BER is B3 or better. As new builds must have an A rating, all are eligible. The loans are always fixed rate, and most do not exceed five years.
If you are buying a second-hand home or switching mortgage and you plan to do works to raise the BER to B3 or above, you could also secure a green rate.
Many homeowners are investing large sums in retrofitting their homes, and not only qualify for a cheaper green mortgage but also reduce the running cost of the property as a result. You just need to submit the new rating once the work is complete. Not all lenders allow for this, however. Some will not allow mortgage drawdown without seeing the BER cert upfront.
For those happy to fix, it is hard to see any downsides to a green mortgage — unless you want to fix for a longer term. There are no variable-rate green mortgages on the market and fixing may not suit a borrower who plans to sell their home within a few years or anyone who expects to be able to make large, early repayments on their mortgage.
While some lenders do have flexibility on their fixed rates, they usually cap extra repayments to 10 per cent, whereas with a variable rate you can pay lumps sums of any amount.
Most first-time buyers want security over their repayments, which is why they tend to favour three to five-year fixed rates. While some of the cheapest mortgages out there are green ones, it is important that borrowers do not assume a green mortgage is the best deal. You may be able to secure a cheaper mortgage elsewhere even if the lender isn’t specifically offering a green home loan. For example, some lenders offer excellent rates for those looking to borrow a Loan to Value (LTV) of 60 per cent or less. You need to do the sums to ensure that you are getting the best rate for your particular situation, or have a Broker do that for you.
The lack of new builds is an issue when trying to source a green home and mortgage. Also, not all buyers can afford to buy the kinds of homes that will allow them to get a green mortgage in the first place. Green mortgage borrowers tend to have higher incomes, larger mortgages and buy higher-value properties.
If you already live in an energy efficient house but don’t have a green mortgage, this is the perfect time to consider switching your mortgage rate. Everyone should look to change their mortgage to avail of a better rate; even those on tracker mortgages should get advice.
Customers on a fixed rate mortgage often don’t realise that they, too, can switch to another mortgage lender and lock in a lower rate. Any customer on a fixed rate mortgage should call their lender and ask how much it would cost them to break – it’s definitely free just to find out!
Once you’ve determined how much your lender will charge, (if anything) you can begin the process of applying to switch mortgages. Start by talking to a mortgage broker to get an understanding of the various rates available from multiple lenders. The whole point of switching is to save as much as possible, a Broker gives customers access to multiple lenders, including ‘Broker only’ lenders.
While the process might take a bit of time and resources, switching mortgage providers is normally worth the effort. Ask us for more, here!