20 Nov 2023

Green mortgages explained

We look at how you can make your home greener

A fifth of the UK’s energy consumption comes from homes. As a nation, it’s a challenge we’re very aware of. In fact, we've already made some big improvements:

  • 8 in 10 homeowners have made some energy efficiency improvements
  • 4 in 10 homes have an Energy Performance Certificate of C or above.

Many lenders are now offering green mortgages. UK homeowners can use them to keep building on those positive trends. That’s because they help people make energy-saving home improvements.

Lady with dog

Want to make your home more sustainable?

If you’re an existing Lifetime Mortgage customer looking to make some eco-friendly improvements to your home, you could claim up to £200 cashback.

In this article we’re going to explain how they work and show you the kind of improvements you can make. You’ll get to meet our customer Lillian, who’s built her own green home. And if you're over 50 we'll suggest a couple of other ways you can borrow to make them.

How does a green mortgage work?

So what is a green mortgage? At heart they’re pretty simple. They’re mortgages designed to help you either:

  • buy a property with an energy rating of A or B
  • fund green home improvements, like better insulation or a heating system upgrade

They’re based on the idea that lenders see energy-efficient properties as lower risk. That’s because they’re more likely to hold their value over the years. And your energy bills should be lower, so you’ll have more financial freedom and find it easier to meet your mortgage repayments.

But green mortgage products aren’t always the best choice.

You might still get a better rate with a standard mortgage. So it’s always worth shopping around to find the best deal for you.

And although green mortgages will help you live in a greener house, they don’t have to be ethical mortgages. For example, a lender offering them might be investing in non-green industries. If that’s a worry, then the Green Finance Institute and Bank.Green can help you find a greener lender.

How to make your home greener

There are many ways of making your home more energy efficient and cutting your carbon footprint.

To lose less heat from your house, cutting down the amount of energy you need to keep it warm, you can install:

  • Double or triple glazing
  • Flat roof, loft, floor or wall insulation
  • External energy efficient doors

To start generating your own heat (and maybe energy too), think about:

  • Solar or thermal heating systems
  • Ground or air source heat pumps
  • A wood-fuelled boiler

And to just be a bit more efficient around the home, try setting up:

  • Smart heating controls
  • Draught stripping
  • LED light bulbs

This list is just a starting point. For more home energy-saving (and hopefully bill-shrinking) ideas, visit the Energy Saving Trust.

How a lifetime mortgage helped Lillian build a more energy efficient home

Our customer Lillian decided to build her own more energy efficient home. She used one of our Lifetime Mortgages to fund it. 

Because she’s over 55, she could use one of our Lifetime Mortgages rather than a green mortgage. She could also have chosen a Retirement Interest Only (RIO) mortgage. They’re also for people aged 55+. Or our Payment Term Lifetime Mortgage, available for over 50s. We’ll tell you a bit more about them once you’ve met Lillian.

Lillian thumbnail

02: 09

Lillian, Llanelli

I bought this place in 2016, it had been empty and derelict for 5 years. It was an old chapel originally. I wanted to make it eco friendly. And I just wanted to make sure this was going to be my forever home.

I wanted somewhere I could be warm and cosy, I wanted somewhere that was sustainable. But I was concerned about how much it was going to cost me to refurbish the whole house. I realised my budget was £30k over.

I started looking at lifetime mortgages when I was still working at the tail end of building this house.

One of the things I bought with the lifetime mortgage was an air source heat pump. It was an expensive item, but it was important for me because as a gardener that air source heat pump won’t take the heat from the soil. Ground source heat pumps do but air source heat pumps don’t.

I wanted to re-use everything in this chapel that I could, and to the best of my knowledge, that’s what I’ve hopefully done. Sustainability is everywhere here.

I feel that I’m part of the community and I’ve got a great group of friends who retired at the same time as me. I joined a walking group. Walking gives me an opportunity to meet other people socially.

Having a lifetime mortgage has given me the independence and freedom to do the house up as I would want, to make sure that it’s long lasting, that it’s eco-friendly. And it’s given me that freedom of not worrying about money.

Are RIO or lifetime mortgages greener than other mortgages?

RIO or lifetime mortgages aren’t any more or less green than other types of mortgage. But you can use money from either one to make your home more energy efficient.

And we’ll help with that if you’re setting up or already have one of our Lifetime Mortgages. Our Energy Saver Cashback offer can give you:

  • up to £1,000 cashback on your first mortgage advance
  • up to £200 cashback across up to three drawdowns.

You can claim:

  • £1,000 once, within 12 months of completing your mortgage
  • £200 up to three times, within 12 months of each drawdown

If you’re thinking about taking out a lifetime mortgage, bear in mind that it’s a loan against your home. You won’t have to repay the loan until you die or move into long-term care, but there may be better ways to pay for your eco-friendly improvements. That’s why you can only take one out through a qualified financial adviser. They’ll make sure you understand how they work, and that it’s the right choice for you.

What’s next?

As energy prices rise, it could be worth looking at how you can make your home more energy efficient.

  • For tips on saving energy in your home, check out the Energy Saving Trust’s website.
  • Our Energy Saver Cashback offer can help cover the cost of any eco-friendly improvements, even if you’re a new Lifetime Mortgage customer.
  • If you don’t have a later life mortgage and think one could help you make your home more sustainable:
  • If you’re looking for a lender with the right green credentials, Green Finance Institute or Bank.Green can help you find one.
  • You can only get a later life mortgage through a financial adviser – and it’s always worth getting good advice on them. If you don’t already have an adviser, find one at Unbiased.

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