Can a low EPC rating prevent me from getting a mortgage?

If you are buying a property to let, you may not realise just how important it is for the property to have a good Energy Performance Certificate (EPC) rating, especially in London. The same applies if you already own a property that you rent out and you want to secure a further mortgage. Regulations which were introduced earlier this year make it illegal to instigate or renew a lease on a property that has an EPC rating of F or G. You will not be able to get a mortgage on a property with one of these low ratings if you are buying to let.
The new regulations may also have a detrimental effect on a mortgage application if you have a portfolio of properties and some of them have an F or G EPC rating. It’s vital to understand the importance of EPC ratings, and the new regulations, if you are thinking of investing in property, or need to secure a mortgage against property you already own.

What does an EPC rating mean?

An EPC certificate must be held for any property that is being sold or rented out, or has just been built. The EPC survey is carried out by a qualified energy surveyor. The aim is to identify how energy efficient the property is; the level of carbon dioxide emissions is also identified. The energy efficiency of a property is graded on the EPC, with A being the highest grade and G being the lowest. If a property has a rating of F or G  it does not meet with the new Minimum Energy Efficiency Standards which became law in April 2018.

The new Minimum Energy Efficiency Standards explained

The Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015 were put in place to identify the minimum required energy efficiency levels for rented properties. These regulations led to the introduction of the Minimum Energy Efficiency Standards. These standards mean that any property on which a new lease is being granted must not have an EPC rating of F or G. From 2020 the standards will apply to all residential property that is being rented out, even when a lease is already in place. The standards will be applied to all commercial rented property from 1 April 2023.

What if the property is a listed building?

Many landlords believe that all listed building are exempt from the new standards. This is not necessarily the case. Some listed buildings, or properties that are within a conservation area, are not required to have an EPC in place, but not all. If you are buying a property to let, or already own a property that you are letting, it’s your responsibility to know whether an EPC is required or not. Usually, the times when an EPC is not required for a listed building, or for conservation area properties, are when complying with energy efficiency standards would have an adverse effect on the appearance of a property; such as the installation of new windows. If it’s necessary to have an EPC for a property then it falls within the scope of the Minimum Energy Efficiency Standards.

Why an EPC survey is important

It’s a legal requirement to have an EPC in place for any property that is being sold, newly rented out or newly built. Aside from this legal requirement, it’s always a good idea to have an EPC survey carried out on properties you own. If you have any properties that you are renting out and that have an EPC rating of F or G, you may find that this has an adverse effect on applications for additional mortgages on the properties, or for a mortgage to purchase another property. The only way to know if your property has a low EPC rating is to have an energy performance survey carried out. The energy surveyor will inspect the property, provide a rating and provide important advice on improving the level of energy efficiency. If you are renting out a property, a high level of energy efficiency makes it more attractive to prospective tenants.

You can see that a low EPC rating can prevent you from getting a mortgage for a property that you wish to buy, or one that you already own. You may also find it more difficult to secure a mortgage for an additional property if you already have properties in your portfolio which have a low EPC rating.

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