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Would You Apply For A Green Home Loan?

Since the mid-1980s, more and more UK banks have seen the benefits of offering products that are in some way tied to ‘green’ environmental issues. One product area where this service has traditionally been lacking, however, is with ‘green’ home loans. Not so anymore, now more and more UK banks will agree to offer a green home loan is you ask. So, given the choice, would you apply for a green home loan?

What is a green home loan?

Before you can readily agree to apply for a green home loan, it might be useful to set out exactly what constitutes a green home loan. Essentially, two different types of green home loans are available.

One the one hand, there is the green ‘bank’ home loan. In short, this is where the lender of the home loan agrees with the borrower that part of the profit proceeds they gain from providing the home loan will be used to finance green environmentally friendly projects. So, for example, if you live in a residential area, you could arrange with your lender to use part of the profits they receive from your home loan to purchase trees and plants, which they would then plant in your neighborhood, or a neighborhood where trees are needed.

On the other hand, there is the green ‘borrower’ home loan. This is where the bank will agree to lender to a borrower to purchase a home that is more environmentally friendly than other types of homes on the market. An example here would be where a lender agrees to lend money to a borrower who wants to purchase an energy efficient home. Normally in order to qualify for this type of green home loan the house being bought need to score highly on the Standard Assessment Procedure.

Green home improvements loan

In addition to the two principal forms of green home loan, it is also possible to apply for a green home improvements loan. Here, essentially, what the borrower intends to do is to take a home and renovate the home so that it becomes more environmentally friendly. For example, if you purchase a regular home and then take out a green home improvements loan to make the house more energy efficient. In this case, it is likely that the lender will agree to give you more favorable terms on both your home loan and on the home improvements loan on the basis that you have used the money wisely to make the planet a more environmentally friendly place.

It should be noted, however, that all other terms of a green home loan and green home improvement loan are likely going to be similar to those found in standard home loans and home improvement loans. Thus, for example, it is unlikely that the lender of a green home loan or home improvement loan is going to offer more favorable interest rate terms than you would otherwise find in the more traditional home loan. Nonetheless, seeing a move towards offering an alternative that gives new home buyers an incentive to look at going green is a very welcome development on the part of UK home loan providers.

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