Background
From April 2018, landlords have been required to achieve a minimum rating of E on the Energy Performance Certificate (EPC) for their rental property for new tenancies or tenancy renewals. Since April 2020, this was extended to cover existing tenancies, meaning all rented properties now need to have an EPC rating of E, even where there has been no change in tenancy.
This is a part of the Government strategy to make carbon-neutral by 2050
Under consideration
Under Government proposals, by 2025, homes in the private rented sector will need a minimum EPC rating of C for new tenancies and in 2028, this may extend to all properties even where there has been no change in tenancy.
Green Mortgage Rating
The EPC rating to obtain a Green Mortgage is A, B or C.
Some tips to improve your EPC rating include:
- Energy-Efficient Lighting
Replace with energy-efficient bulbs, is a simple way to gain a few extra points on your EPC rating. - Glazing
Upgrading from single to double glazed will make your EPC higher by several points and make the property more attractive to new tenants. - Loft Insulation
A cost effective way to improve your EPC rating is to ensure your loft insulation is 270mm thick. This can improve the score by 10 – 15 points, whilst even a top up on existing insulation can get 2-5 points. Also look at wall insulation to improve your rating. - Replace Your Old Boiler
Upgrading your boiler maybe be pricey but will increase your rating by 5-20 points depending on the age of the current system.
Lenders
The mortgage market for green buy to let mortgages is niche but growing.
Most of the major lenders offering personal and limited company/SPV mortgages have launched products. The major exception to this currently is BM Solutions.
Mortgage Benefits
The major benefits for the landlord meeting the higher EPC requirements are:
- Lower rates
- Lower lenders arrangement fee
- Higher loan to values
- Future proof the property against future legislation
Example – (01/09/2021)
- Limited company/SPV rates
- 80% loan to value / Fixed 5 years
- Purchase price £250,000 – Mortgage £200,000
| TMW (Green Mortgage) | Foundation Home Loans | |
|---|---|---|
| Rate | 3.74% | 3.99% |
| Lenders Fee (added) | £995 fixed | £3, 000 (1.5% of mortgage advance) |
| Monthly (interest only) | £626.43 | £674.97 |
The saving over 5 years is £2,912 in mortgage payments and £2,005 in the arrangement fee.
The way forward?
The obvious route for landlords to take advantage of green mortgages is to purchase a new build or recently constructed property. Recent research shows that 84.4% of new built homes have an EPC rating of A or B compared to 2.2% of existing stock.
The other time to review your options is when you intend to refurbish/remortgage an existing buy-to-let. You could obtain 2 quotes: one quote to keep costs to a minimum; and a second that includes raising the EPC to at least a C rating. This would future proof the property against future legislation.
CONTACT US FOR THE CURRENT RATES AND A FREE CONSULTATION
Why Use Neil Soundy Financial Services For Your Mortgage Advice?
- We are experts in complex lending
- We are experts in SPV/Ltd Co lending
- Your initial consultation is free with no obligation
What Our Clients Say
What you see is what you get with Neil Soundy FS! Very professional, very experienced and always on time. Securing mortgages on 2 properties simultaneously using SPV was unbelievable and amazing. We would always recommend Jake, a man that knows his onions, very brilliant at his job!
F Babarinde
How Much Will It Cost Me For Your Advice?
A fee of £495 is payable on completion of the mortgage and Neil Soundy Financial Services Ltd will keep the commission received from the lender for arranging the mortgage.
Neil Soundy Financial Services Ltd is an appointed representative of HL Partnership Ltd which is authorised and regulated by the Financial Services Authority.
The Financial Conduct Authority does not regulate some forms of buy-to-lets.
We do not give or imply legal or taxation advice. We recommend you contact a solicitor or accountant for advice in these areas.
Think carefully before securing other debts against your home/property. Your home/property may be repossessed if you do not keep up repayments on your mortgage.
