Energy Efficient Mortgages Pay for Energy Improvements to Your Home
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.
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 http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US36F&re=1&ee=1
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 http://www.dsireusa.org/incentives/allsummaries.cfm?State=GA&&re=1&ee=1. This link is for the state of Georgia, for other states, visit www.DSIREUSA.org.
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.
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.