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Energy Efficient Mortgages Pay for Energy Improvements to Your Home

August 5, 2010

Are you thinking about refinancing or even buying a new home?  With interest rates as low as they are today, it is certainly a great time to be thinking about both.  If you are, you should consider an Energy Efficient Mortgage, or EEM.  EEM’s are available through FHA and VA, as well as traditional financing.

Old Insulation Covering Ceiling = Hot Attic

Through FHA financing, homebuyers can receive up to 5% of the appraised value of the home to make energy improvements with no additional up-front costs.  If securing a VA loan, homebuyers can borrow up to $6,000.00 if the projected energy savings are greater than the increase in mortgage payment.  Both of those programs are backed by Federal programs.  Traditional financing allows for even more.  If you are getting a traditional loan you can borrow up to 15% of the appraised value of your home.  If your home is valued at $500,000.00, that’s $75,000.00 that can be used to make energy improvements to your home!

You can learn more about these different types of financing at

In addition to being able to finance these energy improvements to your home, you are also available to receive local, state and federal tax incentives.  You can learn all about these incentives at the DSIREUSA website  This link is for the state of Georgia, for other states, visit

In order to receive an Energy Improvement Mortgage, an energy audit must be performed on the house and a HERS index (Home Energy Rating) must be completed.  Here is a great definition of the HERS index from ENERGY STAR:

The HERS Index

The HERS Index is a scoring system established by the Residential Energy Services Network (RESNET) in which a home built to the specifications of the HERS Reference Home (based on the 2006 International Energy Conservation Code) scores a HERS Index of 100, while a net zero energy home scores a HERS Index of 0. The lower a home’s HERS Index, the more energy efficient it is in comparison to the HERS Reference Home.

Each 1-point decrease in the HERS Index corresponds to a 1% reduction in energy consumption compared to the HERS Reference Home. Thus a home with a HERS Index of 85 is 15% more energy efficient than the HERS Reference Home and a home with a HERS Index of 80 is 20% more energy efficient.

Spray Foam Insulation in Rafters = Conditioned Space

Once this is completed, your contractor can take the information from the test and determine what energy improvements need to be done.  From that, a cost of improvements estimate is done as well as a projected cost savings estimate from the improvements is completed.  If your energy cost savings is greater than the increase in your mortgage payments, then you qualify!. Energy improvements can include anything from insulation to windows to ENERGY STAR appliances to things such as solar pv, solar hot water, tankless water heater, high efficiency HVAC etc…

Please leave your comments.  I am really intrigued by these programs and would love to hear from people that are considering it or have done it.

6 Comments leave one →
  1. Kerry Langley permalink
    August 7, 2010 10:52 am


    Great post … EEM’s are greatly misunderstood and unfortunately, missed by many homeowners and home buyers as an incredible tool to fund energy related retro-fits. The interesting point is that these loans, when structured properly, can actually provide funding up $43,000 for the FHA EEM(which can be used for a combination of energy related and “creature comfort/costmetic” improvements, and with a special Fannie Mae Conforming loan, a homeowner/homebuyer can have an “energy improvements/creature comfort/cosmetic” improvement budget up to 50% of the post improvement value (not to exceed a total loan of $417,000)

    I am in the middle of adding a new module to the High Performance Lending software that focuses on this very subject. the module is called “Greenovation Plus” and the numbers are incredible. I am putting the finishing touches on a powerpoint presentation which highlights the numbers associated with the loans that fit into the “Greenovation Plus” program … I’ll forward you a copy …

    Keep up the great work!!


  2. August 7, 2010 3:58 pm

    Nice article, Carson. Using an Energy Efficient Mortgage to make improvements during a refinance or purchase is a no-brainer in most cases. 90% of the homes out there can easily be made more energy efficient.

    Here are a couple of articles about EEMs done by our home energy raters:

    EEM Update – My Friend Perry’s New Home

    An Energy Efficient Mortgage Bonanza

    Unfortunately, too many lenders either don’t know about the program or don’t understand it. Kerry Langley is one who does get it and can really help on the lending side.

    The other important piece of the puzzle is finding a home energy rater. My company is a home energy rating provider, and we have dozens of home energy raters across the Southeast, with quite a few in the Atlanta area. You can find one from our list here:

  3. August 7, 2010 6:10 pm


    Thanks for the good write up!

    I gave you a link on my Blog Roll. I was pointed here by @SLSConstruction

    John Nicholas
    HERS Rater

  4. August 9, 2010 9:16 am

    Thanks for your comments guys, Kerry please do send me the new highlights to your Greenovation Plus program…can’t wait to see it. Thanks for the links Allison and thanks for the blogroll John, i’ll do the same.

  5. August 12, 2010 11:12 am

    Great Article! I saved the links. EcoMech now offers sprayfoam insulation as well. <- There is the link. Getting more and more people to help make a difference by going green brings such value to a home or commercial use.
    Keep up the great work, Carson on your blogging!!!

  6. August 12, 2010 1:21 pm

    Thanks Patty.

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