Is a green mortgage really a green mortgage?

 It’s been an interesting couple of hours researching this…. So, 3 years ago I bought and renovated my loft apartment. I wanted it future and green proof, so I had new high grade windows, electric combi green boiler etc etc.  I have just had a new EPC and the is rated as E!!! best will be a D.

 

So I called up the EPC man and questioned this.  His answer was very clear; EPC is not about green it is about low costs to run the property.

 

Good windows and sound insulation lower the rating, but so does a GAS boiler – as it is cheaper to run. Electric storage heaters are also great, as they use night time tariffs, so again, cheaper to run.  An electric green combi boiler adds, as they are more expensive to run even though they don’t need GSC checks and flues.

 

As we all know, a ‘Green’ car is more expensive than a dirty petrol or diesel – so green really isn’t necessarily the cheapest option, which can work against a lower EPC.

 

Now that is clear, what are these ‘Green’ Mortgages.

 

Well the industry is incentivising property owners to look at the ratings on their properties, which is a good thing.  It has to be A-C (or some high street lenders, just A-B) at the point of completion.  They will not lower your mortgage rate after that, even if you reduce the rating.  The reduction can be up to 0.25% pa, so a good incentive for a long term investor; it also covers BTLs, MUFBs and HMOs – some cover new builds, some don’t.

 

So the best option to benefit is when you refurbish your property.  I would highly recommend you getting an EPC specialist round to tell you exactly what is required to get into the lower bracket, best not to assume.  At least this way you know exactly what your options are and don’t confuse new shiny upgrades as positively effecting your EPC ratings.

 

What can you do to benefit from this:

 

It all starts with the refurbishment.  Most investors wanting to add value will go the refurbishment route.  Also, with the climate issues, the green areas will increase, so you really want to future proof your property.

As a wider topic, lender follow the competition; once a lender decides on doing something, then it really isn’t long before the rest will want to be in the party. 

 

If you are buying a property that qualifies for a term mortgage, but is sitting at the E end if the rating, it is worth considering making the changes a condition of exchange, thereby getting a new EPC before completion, therefore benefiting from the lower product rates.

 

Focus on refinances: The benefits of a valuation pack

Hi everyone, I hope you’ve all had a good week.  I’m sat today listening to the news regarding regulated mortgages and how the higher loan to value products are being reduced, but it seems the opposite is true in the investment market.  Lender’s are relaxing more into their pre-covid criteria, perhaps because they have always got their 25% buffer available it seems less risky.

This week I want to talk about refinance valuation packs.  This is something that we are asked about regularly, especially when we investors want to maximise the valuation on a refinance!

What is a valuation pack?

When you have finished your refurbishment or conversion, another valuation will carried out on the property and we really want to maximise the value of this to allow you the opportunity to pull as much money out of the property as you want.  The purpose of the pack is to demonstrate the added value on top of the purchase price to the surveyor.

You would want to include topics like:

  • Before pictures, with a description of what the rooms have now become
  • Comparable evidence for the rental values; you can use Spareroom or similar to get this
  • Comparable evidence for the property price using Houseprice.ai or similar; the valuer will always use sold comparables
  • All required certificates for the property, ie electrics, fire safety, gas etc
  • The HMO licence if required and if you have it
  • Full schedule of works with corresponding after works pictures
  • If an HMO, then dress some of the rooms, so the valuer can visualise them.

The packs can be really professionally created and that also helps.  This shows the efforts you are prepared to go to as a landlord.

So why would you create a valuation pack?

It is always tricky when you produce information for a professional. You need to gauge it correctly as you don’t want to be seen to try and tell the surveyor what to say or how to do their job!  Providing evidence, rather than the calculation of how you got the figures themselves can be more useful.

The main advantage of the pack is to show what the property looked like previously, and how you had added value to it, over and above the purchase price and cost of works.  That is where the before pictures are so important, so take lots while you can! The valuer will use the comparable evidence,  but remember that will include your own purchas,e so you need to make sure that they don’t use it!

The pack has a couple of other uses though. They can be used to start putting together a portfolio of your projects; as you start applying for bridging loans and mortgages, lenders need to see your experience and so we can use some of the information in this pack towards that.  You can also use it in part or full to attract investors to your brand for future property purchases.  Creating a brand that people want to invest in is key in today’s market and can open up so many opportunities.

How do you use the pack?

I would always suggest that you meet the valuer at the property for a refinance valuation.  You can help him visualise what you have achieved as well as talk to the surveyor about your type of tenants, demand in the local area and so on.  If they have any questions they can be dealt with straight away which can help the report to come back quickly.  This is also an opportunity to engage with the surveyor and give them your pack.

 

As always, if you have any enquiries then please give us a call.