What are “Green” Mortgages and Why Do They Exist?

A green mortgage is a relatively new offering from lenders whereby a lower interest rate is offered on mortgages for a home with a high BER energy rating. Green mortgages are usually offered on homes with an energy rating of B3 or higher.

Why do Lenders Offer "Green" Mortgage Rates?

• Reducing our Carbon Footprint - By encouraging buyers to purchase energy efficient homes lenders are hoping to contribute to a reduction in fossil fuel usage.
• Lower Risk for the Lender - Newly built and recently renovated homes are less likely to have costly issues that would impede a borrower's ability to make mortgage repayments.
• Increased Loan Applications - Naturally, lenders profit from the interest they earn from loans. By offering lower interest rates for more efficient homes it encourages existing homeowners to take out a loan to upgrade their home.
• Marketing Advantage - As the issue of tackling climate change is becoming an increasingly popular topic, businesses are taking the opportunity to associate their brands with the sustainability movement.

Do Green Mortgages Actually Help the Environment?

SEAI states that over a quarter of all electricity used in Ireland is used in homes. Given that homes with a good energy rating require less energy to heat, it means less fossil fuels burned to generate that electricity.

Governing bodies in the EU are ramping up efforts throughout the continent to upgrade our homes. In a recent press release ​​Kadri Simson, the European commissioner for energy, said that “buildings are the single largest energy consumer in Europe, using 40% of our energy, and creating 36% of our greenhouse gas emissions”. This sizable portion of our greenhouse gas emissions is worth addressing and will have an impact over the long-term.

The Guardian reports that the EU Commission believes in this initiative strongly enough that they are considering mandatory retrofit targets for buildings in EU member states to improve the lowest energy rated homes.

Can I Qualify for a Green Mortgage Before My House Has Been Retrofitted?

You will not qualify for a green rate before your house receives a BER certificate with an energy rating that meets the lender’s minimum rating requirement. If you are purchasing a home that doesn’t have a high energy rating but you plan on retrofitting it in the near term you could consider taking out a one or two-year fixed term loan and then apply for a green mortgage once the work is complete. If the work is extensive you might want to think about including the renovation cost as part of your mortgage application.