The cheapest way to borrow for a home retrofit

Borrow £15,000 for a retrofit on a further advance at 4.5% spread over 25 remaining years of your mortgage and you will repay roughly £25,010. Borrow the same £15,000 on a five-year unsecured personal loan at 5.9% APR (annual percentage rate) and you will repay roughly £17,340. The route with the higher advertised rate costs about £7,670 less. That gap is the single most useful thing to understand before you sign any retrofit finance agreement, and almost nobody selling you finance will point it out.

This guide compares five real funding routes on total pounds repaid rather than headline rate, using rates sourced on 21 July 2026. It also explains why the green mortgage rate discount everyone chases is worth 0.1 to 0.15 percentage points, while the green cashback sitting on the same page is worth £1,000 to £2,000. The order of operations that saves the most money is grants first, term length second, rate third.

The number that matters is total pounds repaid

Lenders advertise two things: a rate and a monthly payment. Both are misleading on their own. The rate tells you the price per year of borrowing, but says nothing about how many years you will pay it. The monthly payment tells you what leaves your account, but a low monthly payment usually means a long term, which means more total interest.

Total pounds repaid is the only figure that lets you compare a five-year unsecured loan against a 25-year mortgage extension. It is also the figure that changes people’s minds. Homeowners who would never accept a 9.9% APR happily bolt borrowing onto a 4.5% mortgage and end up paying more.

Five routes for the same £15,000 ranked by true cost

The table below is an illustrative calculation, not a quote. Assumptions: £15,000 borrowed, capital and interest repayment, no arrangement or product fees, rates as sourced on 21 July 2026, and no early repayment. Totals are calculated from the sourced rates using standard amortisation arithmetic. Your own figures will differ.

The two further advance rows are the same lender, the same 4.5% rate and the same £15,000. The five-year version costs £1,780 in interest. The 25-year version costs £10,010. Nothing changed except the term.

Where the rates come from: MoneySavingExpert’s June 2026 market data put two-year fixes from around 4.47% and five-year fixes from around 4.43%, after the Bank of England held base rate at 3.75% on 18 June 2026 for the fourth consecutive time. A 4.5% further advance rate is therefore a fair illustration of current pricing. MoneySavingExpert’s best-buy loan tables put £7,500 to £25,000 unsecured borrowing from 5.9% APR at M&S Bank and TSB over one to five years. Octopus Energy’s heat pump finance, provided by Novuna, is 6.9% APR over three to five years and 9.9% APR over ten years.

Why the term beats the rate

Interest is charged on the balance you still owe, every month, for as long as you owe it. Stretch a debt over five times as many months and you are paying interest on a slowly shrinking balance for five times as long. The rate would have to fall a long way to compensate.

Here is the same £15,000 at the same 4.5%. Only the term changes. Again, this is an illustrative calculation on the assumptions above.

So if you do use a further advance, ask your lender to set it on a short sub-term rather than align it with the remaining term of your main mortgage. Most lenders will do this if you ask. Very few will suggest it, because the default is to match the main mortgage end date.

The same logic explains why installer finance at 9.9% APR over ten years is sold on its monthly figure. At £194 a month it looks cheaper than a £289 personal loan. Over the full term it costs £8,270 in interest against £2,340. That is 3.5 times more money for the same job.

What a green mortgage actually is

A green mortgage is an ordinary mortgage with an incentive attached, offered when your home already has a good Energy Performance Certificate (EPC) rating, or when you commit to improving it. Which? is blunt about the label: these mortgages “aren’t green in themselves”, and neither the bank nor the mortgage is required to conform to any environmental, social or governance criteria. The market has grown from four products in 2019 to over 90 in 2025, around 60 of them residential.

Two forms of incentive exist. A rate discount, usually available on EPC A or B homes. Or cashback, either for owning an efficient home or for carrying out specific upgrades. They are worth wildly different amounts of money.

The rate discount is the least valuable thing on the table

Which? puts typical green mortgage rate reductions at “around 0.1% or 0.15% below the lender’s standard rate”. On a £200,000 mortgage balance, 0.1 percentage point is about £200 a year of interest at the outset, falling as the balance amortises. Across a five-year fix that is somewhere under £1,000 in total, and only if the green deal is genuinely the best rate available to you.

Often it is not. MoneySavingExpert’s analysis found green mortgages “are not normally the cheapest deals on the market”, and gave a worked example on a £200,000 property at 75% LTV (loan to value) over two years where a NatWest green deal cost approximately £400 more than Yorkshire Building Society’s non-green equivalent. MoneySavingExpert’s own warning is worth repeating: do not automatically pick a green mortgage without first checking whether cheaper deals exist elsewhere.

So the discount can be worth a few hundred pounds, or it can be negative. Compare that with the cashback.

Cashback pays £1,000 to £2,000 and the rate discount does not

Cashback for actually doing the work is paid as a lump sum and dwarfs the rate discount. Octopus Energy’s summary of current lender offers, checked 21 July 2026:

A £2,000 heat pump cashback is worth roughly twice what five years of a 0.1 percentage point discount delivers on a £200,000 mortgage, and you get it as cash rather than as slightly smaller monthly payments. It is also the incentive most people miss, because it sits below the rate on the product page.

There is separate cashback for simply buying an efficient home, and here the small print is worth reading at the lender rather than at a comparison site. Nationwide’s own Green Reward terms pay £500 where the property scores 92 or above on the Standard Assessment Procedure (SAP), the numeric score that sits behind the EPC letter grade, and £250 for a score of 86 to 91. MoneySavingExpert summarises the same offer as £500 for an A rated property and £250 for a B. That summary is looser than the product: EPC B covers SAP 81 to 91, so a B rated home scoring 83 qualifies for nothing under Nationwide’s terms despite reading as eligible. Nationwide also restricts Green Reward to purchases, so remortgagors are out.

MoneySavingExpert lists Halifax at £250 for buying or remortgaging an A or B rated home, or up to £2,000 for borrowing for green upgrades, HSBC at up to £1,000, and TSB and Virgin Money at £250 each. Kensington‘s eKo mortgage pays £1,000 cashback for improving the home’s efficiency within 12 months. Saffron Building Society takes the rate-discount route instead, at 0.10% on proof of EPC improvement within six months.

The deadlines are the part that costs people money. Barclays voids the claim if you submit more than three months after the final payment, and requires a TrustMark-approved installer. Halifax and Lloyds require the work to complete within one year. Every one of these is one claim per mortgage, so if you are doing solar and a heat pump in stages, check whether you can claim twice before you plan the order of works.

The genuine 0% comes from a mortgage lender, not an installer

A widespread misconception is that installers offer 0% finance for heat pumps and solar. Mainstream installer finance is not 0%. Octopus Energy’s own heat pump finance runs at 6.9% APR over three to five years and 9.9% APR over ten. Its published representative example: borrow £4,000 over five years at 6.9% APR, 60 monthly payments of £78.64, total interest £718.40, total payable £4,718.40. There are no arrangement or exit fees, early repayment is free, and repayments start a month after installation. That is a reasonable product, honestly presented. It just is not free.

Nationwide’s Green Additional Borrowing is genuinely 0%, fixed for either two or five years, on £5,000 to £20,000, with no product fees. The reversion rate afterwards is Nationwide’s Standard Mortgage Rate, currently 6.49% variable, so the plan has to be to clear it inside the fixed period. The conditions are tight:

• You must already hold a Nationwide-branded mortgage and have made at least one monthly payment. For online applications the mortgage must have been held six months or more.
• Existing mortgage plus the new borrowing cannot exceed 90% of the property value.
• One Green Additional Borrowing mortgage per property, ever.
• 100% of the money must go on eligible energy-efficiency improvements: solar, insulation, heat pumps, energy-efficient windows and doors, and electric vehicle chargers.
• Gas boilers, routine maintenance and like-for-like replacements are excluded.
• Not available on Right to Buy or retirement mortgages.
• The product is limited in volume and Nationwide can withdraw it at any time.

Nationwide announced on 4 March 2026 that it was extending the product so 10,000 customers could borrow up to £20,000 interest free. Around £60m has been lent since launch in 2023, at an average loan size of about £13,000. The most popular measures funded were solar panels, insulation and new windows.

If you bank your mortgage elsewhere, this route is closed to you. That is worth establishing before you spend an evening comparing rate discounts. On £15,000 over five years, 0% saves the entire £1,780 of interest a 4.5% further advance would charge, while a 0.15 percentage point discount on a £200,000 balance saves under £1,000 across a whole five-year fix.

Claim the Boiler Upgrade Scheme grant before you borrow

Borrowing is the last step, not the first. A grant reduces the amount you need to finance, which reduces the interest on whatever is left. Ofgem’s Boiler Upgrade Scheme pays:

• £7,500 off an air-to-water, ground source or water source heat pump.
• £9,000 off an air-to-water or ground source heat pump in eligible off-gas-grid properties, meaning homes heated by oil or LPG with no mains gas connection. This higher rate runs from 21 July 2026 to 31 March 2027.
• £5,000 off a biomass boiler.
• £2,500 off an air-to-air heat pump, residential properties only.

The scheme is open in England and Wales only. Only installers certified under the Microgeneration Certification Scheme (MCS) can apply for and redeem the voucher on your behalf, so the grant is effectively chosen at the same time you choose the installer. DESNZ has funded the scheme at £2.687 billion to 2030, and it has supported approximately 70,100 heat pump installations since 2022.

A £7,500 grant changes the size of the borrowing question completely. Octopus Energy’s typical heat pump price is £4,459 after the £7,500 grant, against a stated national average of £5,600 post-grant. A household that assumed it needed to borrow £12,000 for a heat pump may need to borrow £4,500, which changes which product makes sense. Under £5,000 you are below Nationwide’s minimum and into personal loan territory, where MoneySavingExpert’s tables put £3,000 to £4,999 from 9.2% APR at Santander and £5,000 to £7,499 from 6.9% APR at M&S Bank. Borrowing slightly more to cross a rate band can genuinely be cheaper, which is one of the few cases where borrowing more saves money.

Scotland has an offer England and Wales do not

This is where UK-wide advice falls apart. The Boiler Upgrade Scheme covers England and Wales. Scotland runs its own scheme, and it is substantially more generous.

The Home Energy Scotland Grant and Loan offers grant funding up to £7,500 for a heating system, plus an additional £7,500 as an optional interest-free loan. That is £15,000 in total towards a heat pump or a heat network connection. Energy efficiency measures work on a different basis. The grant covers up to 75% of the combined cost of the measures to a maximum grant of £7,500, and the optional interest-free loan alongside it is capped per improvement rather than as one flat £7,500 pot, with the ceiling running up to £8,000 for a single measure. Check the limit for the specific measure you want before you assume a matching £7,500 is available. A £1,500 rural and island uplift applies to both the heating and energy efficiency grants. Rural and island households can claim up to £18,000 in grant funding.

The loan terms matter too. The admin fee is 1.5% of the total loan value, capped at £150. Repayment runs over five years under £5,000, ten years for £5,000 to £9,999, and twelve years above £10,000. Applications are processed within 10 working days.

For a Scottish household, the interest-free loan sits alongside the grant, so the “cheapest way to borrow” question often answers itself before you speak to a bank. Northern Ireland runs separate schemes again and is not covered by either the Boiler Upgrade Scheme or Home Energy Scotland, so check with NI Direct rather than assuming an England-and-Wales figure applies.

What you put at risk with secured borrowing

A further advance, a second charge and a remortgage are all secured on your home. A personal loan is not. That difference does not show up in any total-cost table, and it should influence the decision.

Secured borrowing gives you a lower rate because the lender can force a sale if you stop paying. Unsecured borrowing costs more precisely because it cannot. Given that the total-cost arithmetic already favours short unsecured borrowing over long secured borrowing in most retrofit cases, the risk argument and the money argument point the same way for amounts under about £20,000.

Secured borrowing makes more sense when the sum is large, when the work genuinely extends the life or value of the property, or when your credit profile means unsecured rates would be poor. Note MoneySavingExpert’s caveat on best-buy loan tables: those are representative APRs, and only 51% of accepted applicants need to be given the advertised rate. If you are offered 12% rather than 5.9%, the comparison changes and you should redo the arithmetic with the rate you were actually offered.

Remortgage, further advance or second charge

If you are mid-way through a fixed deal, remortgaging to release money for a retrofit can cost more than it saves. MoneySuperMarket puts typical mortgage early repayment charges (ERCs) at 1% to 5% of the remaining loan, declining through the deal term. Its illustration: a £200,000 mortgage could carry a £10,000 ERC in the first year of a deal and £2,000 in the fifth year. A £10,000 penalty to chase a 0.15 percentage point green discount is an obvious loss.

Three practical alternatives:

1. Further advance. Additional borrowing from your existing lender, priced separately from your main mortgage. MoneyHelper’s guidance is that a further advance can usually be had on better terms than a second mortgage. Ask for a short sub-term.
2. Second charge mortgage. A separate loan secured behind your main mortgage, which leaves the existing deal untouched. MoneyHelper notes second charge rates “can be a lot higher than for first mortgages”, and that a longer repayment term costs more in interest overall. It earns its place when your ERC is large enough to outweigh the higher rate.
3. Overpayment allowance. Most lenders permit penalty-free overpayment of around 10% of the outstanding balance per year. On a £200,000 balance that is £20,000. If you borrow on a further advance and later come into money, this is how you shorten the term without a penalty. It is also the reason a long further advance is survivable if you are disciplined, though most people are not.

One route that is closed: the Green Deal. GOV.UK states the scheme is closed to new applicants. Legacy Green Deal charges sit on the electricity bill rather than with the borrower, and they transfer to whoever moves in next. If you are selling a home with an active Green Deal loan you are legally required to tell the buyer or tenant and show them the EPC. If you are buying, ask.

The VAT deadline that adds about £750 to a £15,000 job

GOV.UK’s VAT Notice 708/6 sets a zero rate of VAT on installations of energy-saving materials from 1 May 2023 through 31 March 2027. From 1 April 2027 these revert to the reduced rate of 5%. On a £15,000 job that 5% is roughly £750. The cost is not gradual: it is zero for every installation completed by 31 March 2027 and £750 for an otherwise identical one completed the following week.

Qualifying materials include insulation, solar panels, ground, air and water source heat pumps, wood-fuelled boilers, draught stripping, heating and hot water controls, micro combined heat and power units, and, since 1 February 2024, electrical storage batteries and smart diverters.

From July 2026 there are still around eight months of slack in that window, so waiting six months for a better finance deal costs you nothing in VAT: a January 2027 start still finishes inside the zero rate on most domestic jobs. The trade-off only becomes real once your realistic completion date is at risk of slipping past 31 March 2027. At that point the arithmetic is unforgiving. On a £15,000 five-year loan, moving from 5.9% APR to 4.5% saves roughly £560 in interest, which is less than the £750 of VAT you would take on. Waiting for a better rate is fine now and expensive later, so book installers with the deadline in mind rather than the finance.

Should you wait for the Warm Homes Plan loans

The government has committed money to cheap retrofit loans, and it is not available yet. The Warm Homes Plan sets out £15 billion of public investment across this Parliament, which the government expects to pull in £38 billion of total investment. Within that, up to £1.7 billion is allocated for low- and zero-interest consumer loans, plus up to £300 million of other government funding to lower the cost of those loans for consumers, inside a £5.3 billion Warm Homes Fund. DESNZ says the scheme “could be used to fund the installation of a single technology or package of measures” and will “roll out in phases, expanding over time”.

Alongside it, DESNZ and the Green Finance Institute launched the Green Home Finance Strategic Partnership on 3 February 2026, co-chaired by Martin McCluskey MP and Dr Rhian-Mari Thomas. Its steering group includes Barclays, HSBC, Lloyds Banking Group, NatWest and Nationwide, alongside Citizens Advice, the Energy Saving Trust, Energy UK, Nesta, UK Finance and the UK Green Building Council. Its stated ambition is to scale green home finance so that upgrades are accessible for 5 million homes. Its one-year deliverable is much narrower: a shared roadmap, practical solutions for lenders and government, and wider access to affordable upgrade finance. Nobody has committed to financing 5 million homes by February 2027.

Phases and details are still to be confirmed, so do not defer urgent work waiting for it. But do not sign a ten-year finance agreement this month without asking the installer, in writing, what happens if you want to settle early. Octopus and Novuna allow free early repayment. Not every provider does.

Separately, the Green Finance Institute has a table of unsecured green home loan products offered in the UK, last updated March 2026, and reported in January 2026 that the number of unsecured green home loans available in the UK has tripled over the past three years. Some carry rates below mainstream personal loans. It is worth checking before defaulting to a comparison site.

Landlords and the October 2030 maths

The commonly quoted 2028 deadline is out of date. DESNZ confirmed in its 2026 government response that private landlords in England and Wales must meet the higher energy standard by 1 October 2030 for all tenancies, measured against new EPC metrics: a primary fabric performance standard plus a secondary standard of either smart readiness or heating system, at the landlord’s choice.

Key numbers for the finance decision:

• Landlords must invest up to £10,000 per property. The impact assessment estimates average spend will be £5,400.
• Once £10,000 has been spent without meeting the standard, a 10-year exemption may be registered.
• The cost cap is the lower of £10,000 or 10% of the house value.
• EPC assessment costs count towards the £10,000 cap.
• Homes graded C or above on the legacy Energy Efficiency Rating before 1 October 2029 are treated as compliant until that certificate expires.

At an average spend of £5,400 over a four-year runway, a landlord has time to fund the work from rental income rather than borrow, which is usually the cheapest option of all. DESNZ has also committed to issuing clear guidance on when energy efficiency investment in a rented property counts as an allowable or tax-deductible expense, which changes the after-tax cost of the work.

Where people get this wrong

• Chasing the rate discount. 0.1 to 0.15 percentage points is worth a few hundred pounds over a five-year fix. The cashback next to it is worth £1,000 to £2,000, paid immediately.
• Assuming “green” means regulated. Which? states neither the bank nor the mortgage must meet any ESG criteria. The label describes an incentive.
• Judging finance on the monthly payment. The £83 a month further advance has the lowest monthly payment in the table above and the highest total cost in it, at £25,010 repaid.
• Matching a further advance to the main mortgage term. This is the default and it costs roughly £8,230 more on £15,000 than a five-year sub-term at the same rate.
• Assuming installer 0% exists as standard. Take Octopus Energy’s heat pump finance, provided by Novuna: 6.9% APR over three to five years, 9.9% over ten. Short promotional 0% deals do turn up elsewhere, but ask any installer for the APR in writing rather than assuming a 0% offer exists.
• Missing the cashback claim window. Barclays gives three months from final payment. Lloyds and Halifax require completion within a year.
• Remortgaging mid-deal. An ERC of 1% to 5% can erase every penny of benefit.
• Borrowing for something a grant would cover. Check the Boiler Upgrade Scheme or Home Energy Scotland before you check any lender.

When the answer is do not borrow at all

The first case to walk away from is a measure whose payback period runs longer than the loan term plus its interest. You are converting a modest energy saving into a definite monthly bill. Run the Energy Saving Trust’s estimated saving for the specific measure against the total repayment figure, not the monthly one.

The second is a house you expect to leave. If you are likely to move within five years, secured borrowing on a 25-year term is close to pointless. You pay interest and setup costs, then repay the balance on sale, and the buyer gets the benefit of the upgrade.

The third is a like-for-like replacement, such as swapping a gas boiler for another gas boiler. That work is excluded from Nationwide’s 0% product, does not qualify for the Boiler Upgrade Scheme, and does not attract green cashback from any of the lenders above. Fund it the same way you would fund any other household purchase and stop looking for a green product.

A checklist before you sign anything

1. Confirm the grant first. Boiler Upgrade Scheme in England and Wales, Home Energy Scotland in Scotland, NI Direct in Northern Ireland. If you are off the gas grid in England or Wales, check whether your property qualifies for the £9,000 rate rather than the £7,500 one.
2. Get a quote from an MCS-certified installer, because the grant is redeemed through them.
3. Subtract the grant. Only then work out what you actually need to borrow.
4. If you are a Nationwide mortgage customer and the residual is £5,000 to £20,000, check Green Additional Borrowing before anything else.
5. Check whether your existing lender pays cashback for the measure. Lloyds and Halifax pay £2,000 for a heat pump.
6. Ask your lender for a further advance quote on a five-year sub-term, and a second quote on the full remaining term. Compare total interest, not monthly payment.
7. Get a personal loan quote for the same amount over the same term and compare total repaid.
8. Ask about early repayment charges on the mortgage before you consider remortgaging.
9. Book the work to complete before 31 March 2027 to keep the zero VAT rate.
10. Diarise the cashback claim deadline the day the work finishes.

Ian Duncan has spent around 15 years in the UK windows and doors industry and now writes on home energy. He is not a mortgage adviser, heating engineer or energy assessor. This guide is information rather than regulated financial advice. For a personal recommendation, speak to a mortgage broker or use MoneyHelper’s free guidance service. All rates and grant figures were checked on 21 July 2026 and change frequently.