If you\u2019re in the market for a new home, there\u2019s a way to save the environment and some cash at the same time : Consider a \u201cgreen\u201d mortgage.<\/p>\n
An energy-efficient mortgage (EEM), the umbrella term for these types of loans, allows buyers to fold expenses for energy-saving home improvements into their mortgage.<\/p>\n
EEMs are an option if you\u2019re buying or building a home and you want to add energy-efficient features, if you\u2019re refinancing a mortgage for a home you already own and want to add energy-efficient renovations, or if you\u2019re buying a new home that is already energy-efficient.<\/p>\n
The idea is that, in the long run, the money saved on monthly utility bills will offset the higher mortgage payment. The projected energy savings from the lower bills could also qualify buyers for a larger loan amount and a better, more energy-efficient home.<\/p>\n
And at the point of resale, homeowners will likely benefit again, as the energy upgrades can boost the home\u2019s value and attract buyers in a competitive market.<\/p>\n
Improving Your Home\u2019s Energy Efficiency<\/strong><\/p>\n Green mortgages can be used to finance a range of energy-efficient upgrades, from weather stripping to new heating and cooling systems to double-pane windows and solar panels.<\/p>\n A required home energy audit provides recommendations for energy-saving improvements and estimates of the costs and savings of those improvements. Lenders use this information to determine how much you\u2019ll save in energy costs with each improvement.<\/p>\n Fannie Mae, the Federal Housing Administration, and the Department of Veterans Affairs all offer a version of EEMs. The amount of energy improvements a borrower can finance varies by program, ranging from about 5 percent of the value of the property through an FHA loan to around 15 percent with a conventional mortgage. A VA EEM, available to military personnel, caps energy improvements at $3,000 to $6,000.<\/p>\n Understanding the Green Mortgage Lending Process<\/strong><\/p>\n While securing an EEM can be fairly simple for the borrower, it can be cumbersome for lenders unaccustomed to the process of managing the \u201cwork flow\u201d of the energy improvements, says Tonya Todd, senior vice president of strategic products at Mountain West Financial in Redlands, California. This may be why they aren\u2019t more common.<\/p>\n \u201cThe loan itself is easy; it\u2019s the facilitation that takes some work,\u201d Todd says. \u201cLenders that are successful at this will find a local energy-efficient mortgage facilitator. The facilitator handles everything from A to Z to ensure a smooth and timely process for all parties.\u201d<\/p>\n The facilitator works with the buyer, the energy rater, the contractor, the realtor and the lender to keep everything moving to avoid delays.<\/p>\n \u201cAfter closing, the facilitator will ensure the installation of the energy improvements are completed,\u201d she adds. \u201cIt just makes everything much smoother.\u201d<\/p>\n So, if you\u2019re interested in pursuing an EEM, go for it \u2014 just be aware you may have to put some effort into finding a lender.<\/p>\n \u201cNiche lenders do offer these programs and do them well,\u201d Todd says. \u201cHowever, a lot of lenders do not offer them because they do not understand the operational component, or they don\u2019t have the support system internally.\u201d<\/p>\n More Homeowners Are Going Green<\/strong><\/p>\n While they\u2019ve been around in some form since the 1990s, eco-friendly mortgages even today are not particularly well-known. But that could be changing, Todd says.<\/p>\n \u201cEnergy-efficient measures are becoming more popular especially as homeowners are purchasing older homes that may not be so environmentally friendly,\u201d Todd adds. \u201cPeople are more aware of being green. That\u2019s why homeowners are looking for features that will help them save energy.\u201d<\/p>\n The average household spends more than $2,200 a year on energy bills, with nearly half of that going to heating and cooling costs, according to the U.S. Department of Environmental Protection\u2019s Energy Star program. There are significant savings to be had by improving a home\u2019s energy efficiency.<\/p>\n Other Ways to “Green” Your Home<\/strong><\/p>\n Even if you\u2019re not in the market for a green mortgage, there are measures you can take around your house to save energy and reduce your utility bills. The following are some tips \u2014 some simple, some more involved \u2014 from the Energy Star program and other experts :
\n\u2022 Turn your hot water heater\u2019s thermostat to 120 degrees Fahrenheit.
\n\u2022 Keep your refrigerator at 37-40 degrees and freezer at 5 degrees.
\n\u2022 Install and properly use a programmable thermostat (this can save about $180 annually).
\n\u2022 Install low-flow fixtures.
\n\u2022 Do only full loads in the washer and dishwasher.
\n\u2022 Fix any leaky faucets, toilets, pipes, and your roof.
\n\u2022 Seal heating and cooling ducts (in the typical house, about 20 percent of the air in a duct system is lost due to leaks, holes, and poorly connected ducts).
\n\u2022 Seal the \u201cenvelope\u201d of your home \u2013 the outer walls, ceiling, windows, and floor (this can save 20 percent on heating and cooling costs).
\n\u2022 Replace the filters on your air conditioning unit, dryer, and furnace.
\n\u2022 Turn off ceiling fans when you\u2019re not home.
\n\u2022 Set ceiling fans counter-clockwise in the summer to draw cooler air upward.
\n\u2022 Dust your refrigerator coils.
\n\u2022 Plant shade trees to cool your home.
\n\u2022 Request a home energy audit for more tips and advice.<\/p>\n