Cheap loans for a life in the green house

People hoping for a green house should shop around for a mortgage. Some lenders are offering cheaper loans to borrowers interested in buying an environmentally-friendly home, building their own house or restoring a dilapidated property.

A green mortgage is no different from other types of home loan but the lender is likely to focus on features of the property that are of environmental interest. And as in stock market investment, borrowers can choose the shade of green to suits them.

At the light end, the Norwich & Peterborough building society offers loans that aim to "increase awareness about energy efficiency among home buyers". On newly built homes, the N&P is offering a 1% discount off its variable rate for four years (increasing to 1.25% with compulsory insurance), provided houses meet energy-efficient standards.

For existing properties, N&P's green mortgage discounts are reduced respectively to 0.75% and 1%, but the society compensates with a free energy survey offer and £500 cash back to be spent on energy-saving home improvements. It also offers a better than average first-year discount on advances to existing borrowers, where the extra money goes on energy-saving measures.

The Ecology building society takes a darker green, stance, and lends only on properties that give an "ecological payback" such as derelict buildings that would otherwise be abandoned or those in need of major renovation; new, energy-efficient homes; back-to-back terraced houses that are energy-saving by nature; organic smallholdings and farms; and properties that promote community life.

While most lenders will normally lend little or nothing on a derelict property, the Ecology says it believes every property has a value and will lend up to 80%.

As renovations progress and the value of the property increases, the Ecology may provide funds for further improvements. It has helped several buyers to restore properties in areas such as the East End of London.

In rural areas, it looks favourably on loans for properties such as village shops, which do not produce the profits a mainstream lender would require. It also supports borrowers who are building environmentally-sound properties.

The N&P is also happy to finance self-build properties but the Ecology goes a step further by encouraging applications from people with "earth-sheltered" dwellings, or new-builds that have turf roofs and compost toilets.

Like the N&P, the Ecology offers energy surveys. Its Earthsaver Remortgage, for example, surveys properties to see how environmentally sound they could be. Borrower must agree to comply with 80% of the energy-saving measures in the survey to qualify for a mortgage.

Currently the Ecology charges a competitive variable rate of 7.39%, with a 0.5% discount in the first year. The society also offers a 0.25% cut in the rate after four years, where borrowers have maintained their mortgage satisfactorily and undertaken promised energy-saving measures.

The Ecology's mortgage conditions usually include a requirement for insulation and, where appropriate, for windows to be hardwood double-glazed rather than using conventional uPVC.

Another form of ethical mortgage comes from the Catholic building society which offers "socially responsible" loans to people of any religious denomination who have been shunned by mainstream lenders.

Founded in 1960 to provide mortgages for single women who could only get loans from mainstream lenders if they had male guarantors, the society also helps people with disabilities and those who have had serious financial difficulties.

The Catholic will lend to women in financial difficulties due to separation and divorce and around a third of its current borrowers are single women.