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Getting a mortgage on an eco friendly home

Can you get a mortgage on an ecologically friendly home? Find out here

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 17, 2022

Eco home mortgages

We get lots of enquiries from people who need an eco home mortgage.

Many carbon-conscious buyers now want to live in a property with environmentally friendly materials such as timber, recycled plastics or insulated panels.

Some borrowers have found that eco homes are a niche area with limited lenders. This can make the process of getting a mortgage tougher.

The good news is that we work with specialist mortgage brokers across the UK, who have experience in arranging mortgages for eco homes with banks and other lenders.

To give you all the information you need about mortgage loans for eco properties, we’ve created this guide.

Are there mortgages for eco properties?

Yes! They can be more difficult to come by than mortgages for standard residential properties and are often provided by specialist lenders.

Eco properties fall under the category of “unusual properties” which can cause lenders to be reluctant to mortgage them.

This is because the majority of lenders want to know if a property is good security for the loan, so in the unfortunate event of repossession, they can resell it easily.

The worry is that the more unusual the property, the more limited the market and therefore less chance of the lender making a good sale to make their money back for the loan.

That being said, there are lenders who may be happy to lend to you in the right circumstances. Some lenders require a larger deposit between 20 – 30% but this may not be the case with every lender.

Make an enquiry and we’ll refer you to one of the eco property mortgage experts to give you the right advice. You can read more about non-standard construction mortgages here.

What is an eco property?

An eco house is a property that has been designed to have as little impact on the environment as possible.

Often they are built using materials and technology that reduce the carbon footprint and make the property more energy efficient.

Eco housing has grown in popularity with more and more homeowners opting for properties with features such as solar panels, installation or earth sheltered dwellings.

What materials can an eco home be built with?

Common materials used in the design of an eco home include organic ingredients, materials that grow without toxic pesticides or herbicides or recycled products containing glass, wood, metal or plastic.

Because eco homes can be built with materials that aren’t commonly used throughout the construction industry, they can be categorised as “non standard construction”.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

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Self build eco home mortgages

If you plan to build your own eco property rather than buy one, you may need a self-build mortgage rather than a standard mortgage.

You will also need to find a builder who has previous experience with building eco properties. It can be helpful to research builders and see examples of their previous work before signing a contract.

Once you do find a builder to construct your eco home, they will outline how much money is needed to build it. They will break down the overall cost into segments, based on each job/stage of the build.

How does a self build eco loan work?

Once each stage of the build is completed, an independent surveyor will check that the work is finished so that the lender can release funds to pay your builder.

Some construction loan companies only require you to pay interest on the amount of money that is drawn out each month and then once the build is complete, you will begin to repay your loan.

For more information on construction loans and eco self build mortgages talk to one of our advisors here.

How much can you borrow for an eco-home mortgage?

The amount you can borrow on an eco-house mortgage will vary depending on many factors including:

Subject to you passing their affordability checks, most lenders will consider lending up to four times joint or sole income. This would mean that if you had a sole annual income of £25,000, the lender may consider loaning you £100,000.

For a couple with a joint annual income of £50,000, a lender may consider loaning them £200,000.

As well as this, some specialist eco property lenders reward borrowers with a discount on their Standard Variable Rate if the property they are purchasing is energy efficient.

The key to truly understanding how much you can borrow for an eco mortgage is to get the right advice for your situation. Talk to an advisor here for guidance and support with your application.

How much deposit do I need for an eco home?

The amount of deposit that any given lender will require from you will also vary heavily depending on a multitude of factors. These could include whether you are a first time buyerself employed or an older borrower.

That being said, the loan to value (LTV) for some eco mortgage lenders is 80% of the property’s value, which would mean that you would need a 20% deposit.

This could mean that for an eco property worth £200,000, you would need a £40,000 deposit with a £160,000 loan.

However, every lender is different and to find out how much deposit you’ll need with each of the eco mortgage providers you’ll need to talk to one of the expert brokers we work with.

You can read more about mortgage deposits here. Alternatively, speak to an advisor for help with calculating your deposit size with eco mortgage lenders.

Where can I find the best eco build mortgage lenders?

Just because some lenders are less likely to approve a mortgage for an eco property, it doesn’t mean that it is impossible to find one.

In fact, the brokers we work with have found mortgages for people even in instances where they have previously been declined.

There are specialist lenders across the UK who deal with eco property mortgages regularly and the advisors we work with have access to these.

Through years of experience, they have built up industry knowledge about which lenders are most suited to an individual and which have the best deals.

Every mortgage application is different and we only work with brokers who understand this and take the time to find lenders who are right for you.

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We know It's important for you have complete confidence in our service, and trust that you're getting the best chance of mortgage approval. We guarantee to get your mortgage approved where others can't - or we'll give you £100*

How can an eco property mortgage broker help me?

A qualified broker who has experience with eco mortgages in the UK can:

  • Negotiate the terms of your mortgage including interest rates, monthly payments and deposit size
  • Manage the process from start to end
  • Complete and send any documents or contracts to the relevant places
  • Explain the benefits and disadvantages of each eco mortgage offer to ensure you understand how each could affect you financially
  • Offer bespoke advice on eco properties

Good advice is key. We have helped over 120,000 people from all walks of life find a mortgage.

Often those we help have received bad or incorrect advice which has resulted in them being declined for their eco home mortgage.

Speak to an expert today

If you have questions about eco mortgages or want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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