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Green Home Improvement Mortgage

Comment 19th July 2010

Mortgage lenders should be required to offer a product that initially invests in a small (e.g. £10k) ISA-style savings account.

The purpose of this account would be to pay for carbon-friendly home improvements, such as insulation or micro-generation.

Why does this matter?

Homeowners who have interest-only mortgages also invest money to pay off the capital cost of their house at the end of their mortgage term. A canny investor can use some of this money to make home improvements, such as solar panels, which will reduce his / her monthly bills, and so increase the amount of money he / she can invest. If done carefully, the net result can be a shortened mortgage term in the long run.

This pot of money is not available to homeowners with repayment mortgages, and many with interest only mortgages would be too nervous to juggle funds in this way.

If every mortgage paid into such a pot over the first few years, separate to any other investment or repayment, it would be easier for the householder to see this pot as available for (for example) solar panels, and to compare the "pay back time" with the remaining term of the mortgage.

This would greatly increase the uptake of green technologies such as solar water heating or photovoltaic panels, heat pumps and wind turbines.

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