Green Buy to Let Mortgages: Your Current Options

Whether you like it or not, environmental and energy efficiency issues are not going away any time soon. It’s no surprise, then, that financial incentives are being offered to property owners to make energy-saving improvements. But what green buy to let mortgage incentives are already available?

Our homes are a significant source of greenhouse gas emissions as much of the UK’s housing stock does not have sufficient technology in place to make it more environmentally friendly. However, perhaps this is about to change. According to our recent poll, 62% of landlords describe themselves as interested in mortgages that reward borrowers with discounted rates for making their buy to let properties more energy efficient. Could incentives like this persuade more property owners into going green?

What Green Buy to Let Mortgages are Available?
Currently, there are only four green finance options available on buy to let properties: two further advance ranges and two mortgage ranges. Criteria vary considerably between them, making some more challenging to access. It is early days, so we should undoubtedly commend these lenders for taking the plunge and pioneering these products in the first place!

Green Further Advances for Buy to Let Property
Option One: this further advance requires you to spend 100% of the funds on “energy-efficient home improvements”. If environmental improvements are all you’re looking to do, or you want some additional funding to add these to your refurbishment plans, then this is certainly an option to consider. Rates start from 1.49% (a lower initial rate than the lenders standard further advance mortgages) with two and five-year terms available, no product fees and loans of £2,500 to £15,000 (up to 75% LTV).

Option Two: rather than a further advance range to help you get your buy to let property into the A-C EPC bracket, this range offers borrowers with a property already within the A-C EPC threshold a discount on a further advance. Available to portfolio landlords on single self-contained units, HMOs and multi-units, rates start from 3.35% up to 75% LTV for two and five-year terms. There are no application, product or valuation fees.

Green Mortgages for Buy to Let Property
Option One: a remortgage only product available on properties that have an EPC rating of ‘C’ or above issued within the last 12 months. The 75% LTV five-year fix has a reduced product fee and a £750 cashback offer. If you’ve recently made improvements to a buy to let property which have brought up the EPC rating to this threshold, then this may well be an option for you. I would say that the available rate is not necessarily the most competitive and is only available on standard properties.

Option Two: one lender has released a full range of green buy to let mortgages, available for purchase and remortgage. Available on properties over five years old and with an EPC rating of A-C, there are two and five-year fixes available for both standard and more complex properties (HMOs up to 10 bedrooms and multi-units up to 10 units). The rates start from 3.04%, a good few basis points below the standard offering. As an added green bonus, the lender will plant a tree for every mortgage completed on this range.

If you’re keen to make green improvements to your buy to lets but don’t want to take a further advance, standard bridging finance is another option to consider. Once works are complete, you may then be able to refinance onto a green mortgage product (if your EPC is high enough). Our team deals with bridging finance all the time and will be more than happy to help should you decide to use this finance route.

With a minimum EPC requirement of ‘C’ coming for all new buy to let tenancies in 2025, and all tenancies by 2028, this isn’t something you’ll be able to ignore for much longer! I’m sure that the further into 2021 we get, the more green buy to let mortgage products will be available. So, if there’s nothing that will suit you at the moment, don’t fret! We will, of course, keep you updated with products as they become available, so do make sure you’re signed up to our free weekly newsletter to stay up to date!

If you’d like to discuss any of the options currently available or have any other property finance related questions, do not hesitate to contact our award-winning team on 0345 345 6788 or email enquiry@mortgagesforbusiness.co.uk, and someone will be able to help.

28th April 2021