Landlords: your guide to green mortgages

Landlords and tenants can agree on one thing right now: making a rental property more energy efficient is a must. Renters will have rising fuel bills in mind, while landlords will be preparing for changes to minimum EPC ratings. Encouragement to make eco improvements in the rental sector can now be found in the mortgage market, as we explain.

Encouraging more eco efficient homes

Even mortgage lenders have their part to play in our quest to achieve net zero carbon emissions by 2050. The Government has asked banks and building societies to encourage the purchase of eco-efficient properties by offering buyers advantageous products billed as ‘green mortgages’. 

Green mortgages explained

A green mortgage will usually offer better rates of interest and borrowing terms to people who are buying the most energy efficient properties for sale. The home they are buying could be brand new or an older home that has been vastly improved with energy efficient features but, generally, green mortgages are offered to those buying properties where the EPC rating is A, B or C.

Rewarding the intention to go green

As well as preferential products for buyers of properties where the EPC rating is already high, green mortgages are also available to those who pledge to improve an existing property’s energy efficiency, introduced as a way of raising eco standards in the UK’s existing housing stock. Assistance to do this can come in the form of cash back or a higher loan amount with the extra funds covering improvement works.

Green mortgages aren’t just for owner-occupiers

Green mortgages are applicable to everyone buying a property, whether they are a buy-to-let investor or an owner occupier. In fact, green mortgages make the most sense for landlords, as lettings compliance is increasingly focused on improving sustainable standards.

With minimum EPC ratings set to increase from the current E to C for all lets by 2028 – and maybe even a B by 2030 – many landlords may soon automatically qualify for a green mortgage if they are working towards a C EPC rating.

Extra benefits for buy-to-let purchasers

As the number of available green mortgages grows, so does the breadth of help they offer. Buying poorly performing properties isn’t off the cards as there are products designed specifically for investors willing to purchase a property where the EPC rating is D or below.

Lenders are offering bridging loans to landlords who are embarking on eco improvement programmes, with the loan converting to a buy-to-let mortgage once the work is complete. There can be additional discounts for landlords who achieve the highest EPC ratings, prompting them to really make a concerted energy efficient effort.

More choice for investors

A recent report by Mortgages for Business found green mortgages now make up 15% of the buy-to-let home loan market, with over 350 products available. New green mortgages are being introduced all the time, so it’s worth shopping around to find the right product. Talk to us ahead of your next buy-to-let purchase for advice on eco-efficient property investment.

5 things landlords should know about green mortgages

From what was a leftfield way of thinking to a mainstream, everyday goal, going green is an agenda-topping issue in lettings. Green mortgages can help landlords reduce three vital aspects – carbon emissions, fuel bills and mortgage repayments – by incentivising the purchase of the most eco-friendly homes and encouraging the upgrade of the least energy efficient rental stock.

Here are five green mortgage must-knows:-

  1.     Landlords can apply now

Green mortgages, with their more attractive interest rates and borrowing terms, aren’t reserved exclusively for those buying a property to live in themselves. In fact, 15% of the buy-to-let home loan market is devoted to green mortgages, with product numbers at their highest ever level (there were more than 350 green buy-to-let mortgages available as of April 2022).

  1.     The property you’re buying should have a top-end EPC

Green mortgages are offered to buy-to-let investors who are purchasing the most energy efficient properties to rent out. To qualify, there should be an EPC with a rating of A, B or C. It is a legal requirement for every property for sale to have a valid EPC but if you’re in any doubt about the eco performance of any property you want to invest in, please ask us for advice.

  1.     Alternatively, you should be committed to making eco improvements

There is good news for investors who have found a high yielding property that happens to have an EPC of D or below. Some green buy-to-let mortgages are aimed specifically at investors willing to install upgrades to improve the home’s EPC rating. These incentives come in the form of cashback that can be spent on improvements, or a bridging loan that can be converted into a buy-to-let mortgage after work to improve the EPC rating is complete.

  1.     Now is a good time to take out a green mortgage

Whether you are making your first property investment, remortgaging a buy-to-let in your portfolio or are adding something new to your rental collection, considering a green mortgage now is a wise move. With the interest rate creeping up, any home loan that offers an advantage makes business sense, especially if it encourages landlords to install energy efficiency measures.

  1.     Green mortgages & EPC changes go hand-in-hand

The timing of green mortgages is critical, given the EPC changes that lie ahead. Landlords should be preparing now for 2025, when all new and renewing tenancies need to have a C EPC rating. This new standard will also apply to existing tenancies from 2028, and the mandatory expectation may even rise to a B by 2030.

Get in touch if you’re going green

Green mortgages should be the incentive you need to start making energy efficiency changes to a buy-to-let you own or intend to buy. From attractive interest rates and cashback to larger loan amounts to cover eco improvements, what’s not to like? We can help with planning and managing a more sustainable buy-to-let, so contact us today.

The eco improvements that add the most value

If there’s one agenda that won’t be pushed to the bottom of the pile, it’s the eco agenda. How much energy we use, where we get our energy from and what we can do to reduce our carbon footprint is a narrative that has become persistent in the property market.

While most of us acknowledge that building and running homes contributes to harmful emissions (it’s estimated that 40% of the UK’s carbon is emitted by households), the type of improvements that make the most positive contribution to a greener planet are sometimes the most intrusive – and expensive.

So where does this leave the homeowner who wants to improve their eco credentials but has potential plans to move in the near future?

The good news is adding energy efficiency measures may increase the value of your property and make your home more desirable to buyers when it comes to selling – on top of any gas and electricity savings you make while living in the property once any changes are made.

Which eco improvements add the most value? 

Rated People helpfully ranked 15 of the most common energy efficient home improvements in order of how much value they add to a property, as follows:

  1.     Solar panels – £13,512 (value increase)
  2.     Wind turbine – £12,941
  3.     Triple glazing – £12,788
  4.     Underfloor heating – £12,290
  5.     Ground source heat pump – £12,251
  6.     Double glazing – £12,005
  7.     Extra insulation, like cavity wall insulation – £11,764
  8.     Biomass boiler – £11,756
  9.     Air source heat pump – £11,670
  10.     Solar water heating – £11,646
  11.     Electric car charging point – £11,538
  12.     Green/living roof – £11,477
  13.     Biodiverse garden – £11,444
  14.     Old appliances replaced with new ones – £11,190
  15.     Draught proofing – £11,151

How much do the most popular eco improvements cost?

Air source heat pump: expect to pay in the region of £10,000 for the purchase and installation of an air source heat pump. This cost can be reduced significantly if homeowners act quickly. The ‘first come, first served’ Boiler Upgrade Scheme offered by the Government will reduce the bill by £5,000 and there’s zero VAT on the purchase of heat pumps until 2027. 

Verdict: you may just about break even when balancing added value with purchase/install costs but if you take advantage of the Boiler Upgrade Scheme and zero VAT, you’ll potentially add £5,000 in value.

Solar panels: figures will vary according to the size and type of your property, along with the model you opt for. As a general guide, the supply and installation of solar panels will set you back around £5,000–£10,000, although the purchase of the panels will be VAT free for the next five years. 

Verdict: install solar panels in the next five years to take advantage of zero VAT and this installation could add in the region of £5,000 to your home’s value.

Electric vehicle charging point: expect to pay anywhere between £800-£1,100 to buy and install an electric vehicle charging point at a domestic property. If you’re a homeowner who lives in a flat, you’ll be able to apply for the Government’s new ChargePoint grant, which offers a 75% discount on the cost of purchasing and installing a charging point, up to the value of £350.

Verdict: installing an electric vehicle charging point is by far the most lucrative eco improvement. An outlay of around £1,000 could see you add another £10,000 in value to your property.

If you are thinking of selling a property you own, contact the team for advice and a free valuation.

Landlords: claim 75% off an electric vehicle charging point

Another week and another Government initiative to help us meet its goal of being carbon net zero by 2050.The new scheme is aimed specifically at landlords who want to improve the eco-credentials of their buy-to-lets.

Called the ChargePoint grant, the initiative is not brand new – instead it replaces the Electric Vehicle Homecharge Scheme. The new grant invites landlords to apply for a 75% discount on the cost of purchasing and installing a home electric vehicle charging point, up to the value of £350. There are, however, a few caveats to note. The landlord must own the parking area and be VAT registered or registered at Companies House to be eligible.

Landlords who don’t engage in this Government initiative may find their buy-to-let gains an electric vehicle charging point anyway, as a related scheme gives tenants in rented flats and single-use accommodation access to a similar grant. In this case, the charge point installer applies for the grant on behalf of the tenant, with the discount coming off the tenant’s final installation bill. Again, there are conditions. The tenant must own, lease or have ordered a qualifying electric vehicle and prove there is dedicated off-street parking at their property.

The tenant-driven scheme is also a way for landlords who don’t meet the VAT or Companies House standard to benefit from the discount, by encouraging tenants to apply for the grant instead.

Under 41s are prioritising eco aspects

New research conducted by E.ON among Gen Z (aged between 16-27) and Millennials (aged between 28-41) has revealed electric vehicle charging points to be high up on the home moving agenda.

Over three quarters (77%) of Gen Z said eco aspects, such as an electric vehicle charging point installed or a heat pump, were a priority when searching for a new home to buy or rent. In addition, four in five people (81%) aged between 16-41 would pay a higher price for a property if it had an electric vehicle charger, a heat pump or solar panels.

When it came to electric vehicle charging points specifically, 62% of Gen Z renters and buyers placed great significance on this aspect, while 80% of Gen Z and 78% of Millennials said they’d disregard properties that didn’t meet minimum energy efficiency ratings.

More electric cars are being sold

Landlords need to accommodate rising ownership of electric cars – 1 in 5 UK cars sold to date in 2022 is an electric vehicle, according to data from the Society of Motor Manufacturers and Traders.

Sales are expected to accelerate in the coming months as the choice of electric vehicles in the UK market expands. Currently there are more than 140 different electric models to choose from, with another 50 planned by the end of 2022. This compares to just nine electric models in 2011.

Full details about the ChargePoint grant for landlords can be found on the Government’s website, or contact us if you are thinking of making any eco modifications to your buy-to-let.