Freelance Writing Jobs | Today's Articles | Sign In

Articles
Writers

Energy Efficient Loans Make It Easy Being Green

Finance Green Upgrades to Cut Costs, Increase Comfort, Raise Equity

Jan 29, 2009 Marie Lawrence

An Energy Efficient Mortgage can actually reduce the cost of home ownership while improving a home's carbon footprint, comfort and marketability.

According to New York Times real estate journalist, Bob Tedeschi, Energy Efficient Mortgages (EEMs) have been around since the 1980s. But with renewed concerns about energy costs, environmental damage and loss of equity, they are highly relevant for homeowners today. An EEM can be obtained when purchasing a new home or refinancing an older one.

With an EEM, even borrowers of modest income can qualify for a larger loan, pay less overall each month and increase a home’s comfort and resale value. Mortgage payments increase but the increase is more than offset by lowered monthly utility costs. In addition, the cost of the improvements will be tax-deductible, since they are included in the mortgage.

Several Ways to Finance an EEM

In the United States, there are several ways to get an Energy Efficient Mortgage:

  • Conventional EEM loans allow someone buying a home or refinancing an existing purchase to borrow up to a certain percentage of the appraised value of energy-efficient improvements or to increase the borrower’s effective income by a dollar amount equal to the projected energy savings. Conventional EEMs may accept different kinds of home energy rating and a broader range of energy improvements than other methods of EEM financing.

  • Veterans Administration (VA) loans (www.homeloans.va.gov) allow military personnel, reservists and veterans to borrow money for energy-efficient improvements in conjunction with VA housing loans. The VA Web site has a PowerPoint presentation on EEMs.

  • Federal Housing Administration/Housing and Urban Development (FHA/HUD) EEM loans allow lenders to add the cost of energy efficiency improvements to an existing loan up to a percentage of the home’s value, can be combined with rehabilitation loans or loans for disaster victims and can be used to finance site-built or manufactured homes.

  • Individual states and municipalities also offer energy efficiency loans. North Carolina State University manages a comprehensive Web site (www.dsireusa.org) with current and detailed state by state information on federal and locally funded financial incentives for energy efficiency improvements.
Get a Home Energy Rating Before the EEM

Before obtaining an EEM the homeowner will get a Home Energy Rating (HER) (sometimes called a home energy audit) by a certified Energy Rater (see www.resnet.com). The cost of the rating may be covered by the loan. The Rater will inspect the home and provide a report with information such as:

  • Energy efficiency score for the house before improvements
  • Recommendations for upgrades
  • Cost and life expectancy of improvements
  • Estimated annual energy costs before and after upgrades

Family of Six “Goes Green” for Less Money

The Geothermal Heat Pump Consortium (www.geoexchange.org) reports that, in 1997, despite a modest income, rural Kansan Charles Burger and his family of six qualified for a mortgage on a $108,200 house (including water hookup and land) with the United States Department of Agriculture Rural Housing Service.

The Burger’s new house came with comprehensive weather-proofing and insulation, and a two and a half ton geothermal heat pump that provided heating, cooling and hot water. The cost of the heat pump system was $10,245. The estimated cost of a natural gas/ electric air conditioning system was $4,597.

The difference of $5,648 added to a 30-year mortgage at 8% was estimated to increase the monthly mortgage payment by $31 after taxes. Actual heating, cooling and hot water costs for one year in the new house were $432 while projected costs with a less energy-efficient gas/electric system were $1,174, for a net saving of $31 per month.

For more information about EEMs and other financial incentives for energy-saving projects go to the U.S. Department of Energy's Web site. In Canada, visit the Office of Energy Efficiency's Web site (www.oee.nrcan.gc.ca/corporate/incentives.cfm). In the UK, go to www.energysavingtrust.org.uk.

The copyright of the article Energy Efficient Loans Make It Easy Being Green in Mortgages/Loans is owned by Marie Lawrence. Permission to republish Energy Efficient Loans Make It Easy Being Green in print or online must be granted by the author in writing.
EEMs Can Finance Energy Improvements on Any House, M. E. Lawrence EEMs Can Finance Energy Improvements on Any House
   
What do you think about this article?
NOTE: Because you are not a Suite101 member, your comment will be moderated before it is viewable.
post your comment
What is 1+0?
;