There are a lot of reasons to go green!
You may be trying to reduce your energy usage and save money, or you may simply want to keep our environment clean by reducing your impact on it. Sometimes, the initial cost of switching over to a greener lifestyle can stop people from making the switch. To help homeowners and businesses realize the benefits of going green, more programs are appearing to help them. One little known program is the Energy Efficient Mortgage (EEM) which allow those looking to buy a new home or refinance to install energy saving upgrades to their home without additional out of pocket expense.
Here are just a few of the many upgrades that qualify:
- Alternative heating such as a pellet stove
- New windows (or inserts such as Indow Windows) and insulation
- New roofing technologies
- Solar Panels for both electricity and hot water heating.
In order to qualify for an Energy Efficient Mortgage, you must first qualify for a regular mortgage. When shopping for a mortgage you should always talk to different lenders and see which one currently has the best mortgage rates. Energy Efficient Mortgages are most commonly offered through Federal Housing Administration (FHA) or Veteran’s Administration (VA) loans, but are becoming increasingly more common among traditional lenders as well. While Energy Efficient Mortgages are billed separately from the rest of your mortgage, it will not add a lien to your property like owning a second home. In addition, most lenders will combine the payments so you do not need to worry about another bill.
The next step after being qualified is to have your house audited by a professional energy rater. The energy rater will prepare a Home Energy Rating Systems (HERS) report for you. It will rate your house on a scale of 1 – 100, the lower your score, the more energy efficient your home. The report will also include suggested upgrades, and a new score based on those upgrades. Finding an energy auditor can be tough, but luckily energystar.gov offers this list of partners. Trade organizations such as Efficiency First or The Building Performance Institute are also excellent sources for qualified local contractors.
Now that you have your HERS report, it is time to speak with your loan officer again. Your loan officer will use the HERS report to figure out how much extra money you are qualified to borrow. Usually, this number will be between 5-15% of the houses total value. After you are approved for the EEM, it is best to go and talk with your auditor again. The auditor will be able to tell you the best upgrades to purchase that will fit your budget.
At first, it may seem like an EEM is bad idea. After all, you are increasing your monthly mortgage payment. The major benefit from an EEM is that after you have installed your upgrades, your utility bills will be lower. In most cases this will offset the higher loan, and can actually lower how much you are paying in related bills each month. You can also look at an EEM as a long term investment. Once your mortgage is paid off, you will continue to enjoy the savings from the upgrades you installed in your house. In most cases, these upgrades will add value to your home as well, so if you ever sell it, you can ask for more.
Going green is always a good idea, and with your new knowledge of Energy Efficient Mortgages it just got easier!
Guest blogger Michael Ciocca is a writer for Total Mortgage.