Mortgage Lenders Happy With Green Deal Finance

25 July 2013

Taking out Green Deal finance will not hinder the future sale of a property, it has been revealed.

According to the Council of Mortgage Lenders (CML), mortgage lenders are unlikely to penalise a householder that has made energy efficient changes using Green Deal financing. However, the council is quick to point out that full disclosure is vital to selling a property.

The Green Deal — a Government initiative that launched on 28 January 2013 — allows householders to apply for financial assistance in order to make energy efficient improvements to their property. Some of the 40–plus measures available under the scheme include Cavity Wall Insulation, Solid Wall Insulation and Loft Insulation.

First, an assessment is carried out to establish which measures will best suit a property. Providing the householder is willing to make changes, a Green Deal plan is then drawn up and agreed by both the Green Deal provider and the householder. Home improvements are then undertaken as necessary.

At this stage, a Green Deal plan goes ‘live’, which is where things get interesting. Under the scheme, the original loan issued is repayable via a property's fuel bill. The loan itself is linked into the property, not the householder. If the current owner decides to sell up, the outstanding loan sum remains interlinked to the property and the new occupier.

This process has left some wary of applying for Green Deal finance for fear that it will hamper house sales further down the line. But the CML believes this is a worry that can be pushed aside.

According the council, “In most cases, lenders assessing new mortgage applications will be able to treat Green Deal commitments as ‘basic essential expenditure’ under the Financial Services Authority's (FSA) rules for assessing affordability.“

Furthermore, the addition of the measures such as Cavity Wall Insulation, Solid Wall Insulation and Loft Insulation could actually benefit future house sales. With more and more house hunters on the lookout for energy efficient properties, and with the Government's Energy Performance Certificate (EPC) scheme in full swing, the Green Deal has the potential to add value, not take it away.

But those that do take out finance are being advised to provide full disclosure and acknowledgement.

According to the CML: “In principle, lenders welcome measures that may reduce energy costs on mortgaged properties, but they will wish to know when Green Deal finance and improvements exist so that they can assess any potential positive or negative impacts on their exposure to risk, or on property valuation aspects.”

The CML provided extensive input into the Government's published guidelines relating to the Green Deal and continues to review the scheme and its practicalities.

In May, both Nationwide and the Lloyds Banking Group voiced their support of the Green Deal.

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