Green mortgages for a green home
Maybe you’ve sworn off using plastic water bottles and single-use coffee cups, and you’re pretty sure you know everything there is to know about what can and can’t be recycled—so what’s next in your quest to go green? Think: your home.
Replacing appliances, windows, HVAC systems, insulation, etc. can significantly reduce your carbon footprint—and your utility bills. But similar to the phrase, “you’ve gotta spend money to make money,” making your home energy efficient (or buying an already energy efficient home) comes with a cost.
While there’s a huge potential to save on month-to-month utilities down the road, many people are hesitant about covering those upfront costs. And because it’s not something that they need to address immediately, many homeowners never make the leap over that initial-cost hurdle.
Here’s where green mortgages come in…
Energy Efficient Mortgages
An Energy Efficient Mortgage (EEM) can be used both to purchase or to refinance a home that is already certified as energy efficient, as well as to finance the upgrades required to make a home energy efficient. Taking into account the value of what will be saved on utilities, a lender can typically provide what ENERGY STAR® refers to as “more favorable financing terms to the borrower, such as a better debt-to-income qualifying ratio that enables the borrower to qualify for a larger loan amount and a better, more energy-efficient home.”
To begin, you’ll first need to receive a home energy assessment or rating that verifies that the home is energy efficient, or that it will be once the planned improvements are made. This report also provides the lender with an Energy Savings Value, which reflects the estimated energy savings and the value of the energy efficiency measures.
The inspection process
If you own your home, you can receive a home inspection by a certified home energy professional based on a Home Energy Rating System (HERS), whereas if you are purchasing a new home, the builder will be responsible for ensuring the home meets all green guidelines. Some of the areas that will be inspected include:
- Exterior walls
- Floors over unconditioned spaces, such as garages or cellars
- Ceilings and roofs
- Attics, foundations and crawlspaces
- Windows, doors, vents and ductwork
- HVAC system, water heating system and thermostat
- Air leakage of the home
- Leakage in the heating and cooling distribution system
Different types of green mortgages
EMMs come in a variety of different forms, including a conventional option (through Fannie Mae’s HomeStyle® Energy Mortgage), a Federal Housing Administration (FHA) Energy Efficient Mortgage Program and a Veterans Affairs Energy Efficient Mortgage.
And if you’re house hunting and you’ve found something that you love, but it doesn’t have green systems already in place, you can look into Guaranteed Rate’s Clean Energy Mortgage Program. This potentially allows buyers to include the cost of installing solar energy into their home financing.
Going green within your home doesn’t have to be a pipe dream 20 years in the making. Speak with a loan officer to see what kinds of options could be available to you.