Brown and Green Mortgages

They may be called tagged with a colour, brown and green, but that’s not the only thing they have in common. Both types of mortgages are ecological in their outlook.

Brown mortgages are specifically targeted at buyers who wish to convert or restore an existing property; in property terms this can be seen as recycling. A lender will loan money to buy the property but also the capital to finance the restoration with regular payments expected throughout the project. Lenders will let you borrow up to 85% of the valuation or purchase price, usually whatever is the lower and then a maximum of 95% of the value of the completed project. Buying and restoring/renovating a rundown property is an alluring proposal for those eager to get on the property ladder.

Equally, green mortgages are designed towards prospective homeowners who value an ethical approach to living. Recently the Energy Efficiently Partnership (EEP) have issued lenders with a definition which they feel should be applied to green mortgages. They (the lenders) should encourage consumers to buy or to work towards an energy-efficient home, offer one or more defined financial incentives linked to home energy use, encourage consumers to access advice and support on domestic energy use prior to making improvements and have defined qualifying criteria, based either on a minimum energy standard or commitment to making certain home improvements. They also propose that a lender would reward borrowers by meeting these objectives by offering lower interest rates, cash back, and no early repayment charges, fees-free or a higher LTV (loan to value).

So, both types of mortgages are based on an ecological stance with both having distinct advantages for those who take them out; brown mortgages lenders rewarding buyers for investing in neglected property and green mortgages lenders rewarding buyers who invest in sustainable products for their homes.

Currently only a handful of lenders offer brown and green mortgages, but industry experts expect a boom in borrowers looking for ethical finance options and, of course, lenders will responded by offering competitive packages.