Energy-efficient home improvements can cut utility bills and reduce a property’s carbon footprint, but the upfront costs are often substantial. Solar panels, heat pumps, and solid wall insulation regularly run into several thousand pounds. A secured loan can provide access to larger amounts at lower rates than most unsecured alternatives, but it does so by registering a legal charge against the property. If repayments are not maintained, the lender can ultimately take steps to recover the debt from the property’s value.

This guide explains what green home improvements typically cost, how a secured loan works in this context, what government grant schemes are worth checking before you size the borrowing, and the risks and eligibility factors involved. It is informational only and does not constitute financial advice. Actual costs, rates, and grant availability vary, and anyone considering borrowing for this purpose may benefit from speaking to an independent financial adviser.

What typical green improvements cost

The amount you need to borrow depends directly on which improvement you are funding, and the range is wide. Cavity wall or loft insulation is at the lower end and may cost only a few hundred to a few thousand pounds depending on the property size and existing access. At the other extreme, a ground source heat pump installation for a typical UK property can exceed £15,000 before any grant is applied. Understanding the likely project cost, and getting two or three contractor quotes before approaching any lender, helps ensure you borrow an appropriate amount without either underfunding the project or taking on more secured debt than necessary.

The chart below shows illustrative cost ranges for the most common green improvements. All figures are indicative and will vary significantly by property size, location, and contractor. Always build in a contingency of around 10 to 15 per cent above the lowest quote.

How a secured loan works for green improvements

A secured loan for home improvement works in the same way as any other second charge mortgage: the lender assesses the available equity in the property, the loan-to-value position, and the borrower’s income and affordability. The purpose of the borrowing (in this case, an energy efficiency upgrade) does not typically change the underwriting criteria, though some lenders have introduced specific green improvement products that carry slightly preferential rates for works that raise the property’s Energy Performance Certificate (EPC) rating.

The EPC rating is worth understanding because it can affect both borrowing costs and future options. A property that moves from an EPC E to a C or B after the works may become eligible for a better rate on any subsequent remortgage or further lending, and a higher EPC rating is increasingly relevant to buyers and valuers. That said, lenders do not require an improved EPC as a condition of the loan in the way that grants sometimes do; the loan is assessed on equity and affordability, and the energy performance benefit is a secondary consideration.

For a full explanation of how lenders assess secured applications, including LTV thresholds, income treatment, and what documentation is typically required, see our guide to what secured loan lenders look for. The LTV and equity calculator lets you check how much equity is available and what combined LTV a new loan would create.

What this costs

A secured loan for a green improvement carries the same cost structure as any second charge mortgage: an arrangement fee, a valuation fee, legal costs, and interest charged at the agreed APR over the loan term. The monthly repayment depends on how much is borrowed, the rate, and the term chosen. The total interest paid over the life of the loan can be substantial for longer terms, even at relatively competitive rates, and is worth modelling carefully against the energy savings the improvement is expected to generate.

One consideration specific to this type of borrowing is the relationship between the loan term and the improvement’s payback period. A solar panel installation might recover its cost through energy savings over 8 to 12 years in favourable conditions, but a 15-year secured loan at even a modest rate may result in the interest cost exceeding the energy savings over that additional period. Keeping the loan term in line with the realistic payback period of the improvement is a useful discipline.

The calculator below lets you model monthly repayments and total interest for a range of loan amounts and terms. All figures are illustrative.

For a full breakdown of the fees that sit on top of the interest rate, including arrangement fees, valuation costs, and legal charges, see our guide to secured loan fees explained. The early repayment charge calculator is useful if you expect to pay the loan off before the end of the term, as many fixed-rate secured products carry a penalty for doing so.

Government grants and funding worth checking first

Several government schemes currently provide grants or interest-free loans that can reduce the total amount you need to borrow. Checking these before sizing any loan is worthwhile, as they can materially change the borrowing required, and in some cases fund the project entirely, without any secured debt. The schemes below were active at the time of writing, but eligibility criteria, grant amounts, and availability change. Always verify current terms directly on gov.uk or through your local council before relying on them in your plans.

There is also a growing category of private “green mortgage” and green home improvement loan products from certain lenders that offer a preferential rate for works that will improve the property’s EPC rating. These are not grants, but they may reduce the rate available on a second charge or remortgage if the property is currently rated D or below and the works will move it to C or above. This is worth asking about explicitly when comparing lenders.

Risks and what to weigh carefully

The case for using a secured loan for an energy improvement rests on three potential benefits: lower interest rates than unsecured products of equivalent size, the ability to borrow larger amounts in a single facility, and the possibility that the energy savings generated over time partially offset the interest cost. None of these is guaranteed, and each carries a counterpart risk that is worth understanding clearly before committing.

For a fuller explanation of the risks attached to secured borrowing generally, see our guide to the risks of secured loans. The guide to what happens if you cannot repay a secured loan explains the enforcement process and the options available if financial circumstances change after the loan is in place.

Is a secured loan the right route?

A secured loan tends to be worth considering when the improvement requires a sum that is genuinely difficult to fund unsecured, the available equity provides a reasonable buffer above the combined LTV, and any applicable grants have been applied first to reduce the borrowing required. It is less obviously the right route when the project could be funded by a lower-cost unsecured personal loan, or when the available equity is limited and a second charge would push the combined LTV close to the lender’s maximum threshold.

There is also a remortgage alternative worth considering if the existing mortgage rate is approaching the end of a fixed term. Releasing equity through a remortgage at a competitive rate can be cheaper overall than a separate second charge, though it involves renegotiating the whole mortgage and may not be practical if the existing rate is favourable or there are early repayment charges on the current deal. Our guide to the secured loan vs remortgage comparator models this comparison. For smaller amounts, typically up to £25,000, an unsecured personal loan may avoid the need for any property security at all; the secured vs unsecured threshold tool helps identify at which borrowing amount the secured route becomes more cost-effective.

Frequently asked questions

Does a green home improvement increase my property value?

It may do, but the relationship is not straightforward and the uplift is not guaranteed. A property with a high EPC rating and modern energy systems is increasingly attractive to buyers who factor running costs into their purchase decisions, and some valuers will reflect energy efficiency in their assessments. However, the cost of improvements does not translate directly into an equivalent increase in market value. The benefit tends to be more consistent in markets where energy costs are prominent in buyers’ minds and where the property is competing against similar homes with better ratings.

Borrowing against an anticipated uplift in value is therefore speculative. The more reliable financial case rests on the energy savings the improvement will generate over time, and on whether those savings, net of the loan’s interest cost, represent a worthwhile return on the investment. Getting an independent valuation before and after major works is the only reliable way to assess the impact on a specific property.

Will lenders treat a green loan any differently from other home improvement lending?

In most cases, no. The majority of secured lenders assess green improvement loans using the same criteria as any other home improvement borrowing: available equity, combined LTV, income, and affordability. The stated purpose of the borrowing does not typically result in a different underwriting outcome, though some lenders may ask for a breakdown of the works planned as part of their case packaging.

A small number of lenders have introduced specific green secured loan or green second charge products that carry a slightly reduced rate for works that will improve the property’s EPC rating. These are not yet widespread but are worth asking about when comparing lenders. The rate reduction, where it exists, is typically modest rather than transformative.

Is it better to remortgage or take a second charge for green improvements?

It depends on the terms of the existing mortgage. If the current mortgage is on a competitive rate and still within a fixed period, remortgaging would likely trigger an early repayment charge, which may outweigh any saving from a lower rate on the released equity. In that case, a second charge secured loan that sits alongside the existing mortgage is usually the more practical route.

If the existing mortgage is approaching the end of a fixed term, or is on a standard variable rate, then remortgaging to release equity for the improvement may be cheaper overall than a separate second charge. The arrangement fees, legal costs, and rate on a new mortgage versus a second charge product all need to be compared across the full term. The secured loan vs remortgage comparator is designed for exactly this comparison.

What if energy prices fall and my savings are smaller than expected?

This is a genuine risk, particularly for solar panel investments where the financial case rests partly on the value of energy generated or exported. If energy prices fall significantly, the payback period extends, and the loan’s interest cost may represent a larger proportion of the total return on the investment than initially expected. The improvement itself still has value in terms of reduced consumption, but the financial case becomes less clear-cut.

The sensible approach is to avoid sizing the borrowing on the assumption that energy savings will comfortably cover repayments. The loan should be affordable from income alone, with any energy savings treated as a benefit rather than a necessary offset. If affordability depends on the savings being realised, that is a sign the loan may be larger than the position comfortably supports.

Can I combine a government grant with a secured loan?

Yes, in most cases. Government grants such as the Boiler Upgrade Scheme reduce the total project cost, which means a smaller secured loan is needed to cover the remainder. There is no general prohibition on using a secured loan alongside a grant, though specific scheme rules vary and it is worth confirming the position with the scheme administrator and the lender.

Some schemes require the grant to be confirmed and the works to be completed by MCS-certified or equivalent installers. In these cases the grant is typically paid directly to the installer, and the secured loan covers the outstanding balance after the grant is applied. Timing matters, and it is worth having a clear picture of the grant amount and any conditions attached before submitting a loan application, as this directly affects the amount being requested from the lender.

This article is for informational purposes only and does not constitute financial advice. Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it. Government grant schemes referenced in this article are subject to change, so always verify current eligibility and amounts on gov.uk or through the relevant scheme administrator before making financial decisions. Actual outcomes will depend on your individual circumstances.