What finance options are available for buying Eco-Friendly Property in the UK?

Introduction

With the growing popularity of eco-friendly properties in the UK, there has never been a better time to invest in a sustainable home. However, the financial aspect of purchasing an environmentally friendly property can be a challenge. In this article, we’ll examine the finance options available for buying an eco-friendly property in the UK, from government-backed schemes and green mortgages to other funding opportunities that can help you make the transition to sustainable living.

1. Government-backed schemes

The UK government offers various schemes to support eco-friendly housing, making it more accessible for potential homeowners. Some of the most popular schemes include:

a. Help to Buy: Equity Loan – This government-backed scheme offers an equity loan of up to 20% (40% in London) of the property’s value for new-build eco-friendly homes. The loan is interest-free for the first five years, making it easier for first-time buyers to purchase a sustainable property.

b. Shared Ownership – With this scheme, you can buy a share of an eco-friendly property (between 25% and 75%) and pay rent on the remaining portion. Over time, you can increase your share, eventually owning the property outright. Shared Ownership is an excellent option for those who cannot afford a large deposit or do not qualify for a standard mortgage.

2. Green Mortgages

Green mortgages are a relatively new financial product designed specifically for eco-friendly properties. These mortgages offer preferential terms, such as lower interest rates or higher loan-to-value (LTV) ratios, to encourage the purchase of energy-efficient homes. To qualify for a green mortgage, the property must meet specific energy performance criteria or incorporate sustainable features, such as solar panels or excellent insulation.

Several UK lenders offer green mortgages, including Barclays, Nationwide Building Society, and Ecology Building Society. Be sure to research different green mortgage providers and compare their terms, as the criteria and benefits can vary between lenders.

3. Energy Efficient Mortgages Initiative (EEMI)

The Energy Efficient Mortgages Initiative (EEMI) is a pan-European project that aims to promote energy-efficient properties by offering better mortgage conditions to homeowners who invest in them. While not exclusive to the UK, British lenders participating in the EEMI provide incentives, such as reduced interest rates, to borrowers who purchase eco-friendly homes or undertake energy-saving renovations.

4. Local Authority funding

Some local authorities in the UK offer grants or low-interest loans to help homeowners invest in eco-friendly properties or retrofit their existing homes with sustainable features. These funding opportunities can cover various improvements, such as insulation, solar panels, or energy-efficient heating systems. Check with your local council to see if they provide any financial support for eco-friendly housing.

5. Crowdfunding and peer-to-peer lending

If traditional financing options do not suit your needs, consider alternative methods like crowdfunding or peer-to-peer lending. Platforms like Abundance Investment and Triodos Bank enable individuals to invest in green projects, including eco-friendly housing. These investments can offer competitive returns and help support the transition to a more sustainable future. There are also a number of bridging lenders who offer eco-friendly bridging loans.

Conclusion

Purchasing an eco-friendly property in the UK is not only beneficial for the environment but can also offer long-term financial savings. By exploring the various finance options available, from government-backed schemes and green mortgages to local authority funding and alternative financing methods, you can find the best solution to help you invest in a sustainable home and contribute to a greener future.