Energy-Efficient Mortgages

Increasing your home’s energy efficiency or purchasing a home that is already energy-efficient can provide several advantages. Energy efficiency is of increasing importance as more people recognize the fact that energy sources are not infinite—to this end, several federal institutions are now providing mortgages for people who wish to make their homes more energy-efficient. In the long term you’ll benefit from reduced utility bills and a higher potential resale value on your home, and in the short term you’ll be able to stretch your mortgage dollars a little bit further.

Getting an Energy-Efficient Mortgage for Remodeling

Remodeling can be expensive, particularly if you remodel with energy efficiency as a top priority. In the long run you save on utilities, but the start-up costs make this type of remodeling too expensive for most people to afford. One type of energy-efficient mortgage is designed to help people who are remodeling with the intent to increase the energy efficiency of their home. In essence, the money you save on monthly utility bills is put towards making mortgage payments.

To qualify for this type of mortgage, you must make changes that increase your home’s energy efficiency such that you save an amount of money on monthly utility bills that is greater than the amount of your monthly mortgage repayment. The total amount of money you save must also be greater than the total costs of the changes, including any maintenance that will be required in the future. To be eligible for an energy-efficient mortgage for remodeling, you must also apply before you start the work, and you must apply before you arrange any other necessary financing.

Energy-Efficient Options for your Home

• Insulation materials such as cellulose and cotton are not only more energy efficient, but are more environmentally friendly, too.
• Up to 30% of a home’s energy is lost through its doors and windows—well-sealed windows and doors such as wood or aluminum cladding can prevent much of this energy loss.
• Ceiling fans are more energy-efficient than air conditioning when it comes to cooling your home.
• Using light dimmers and motion sensors increases your lighting efficiency.
• Trees and large shrubs planted in the right places provide shade in the summer to help cool your home, and provide wind-breaks in the winter that help reduce heat loss.

Getting an Energy-efficient Mortgage to buy a Home

Energy-efficient homes are typically more expensive to buy, but using an energy-efficient mortgage to finance the purchase increases your buying power. If the home you want to buy qualifies for an energy-efficient mortgage, your lender can “stretch” out your qualifying debt-to-income ratio to allow you to afford it. The extra cost of the mortgage is taken care of by the fact that you’re saving money on your monthly utility costs.

Alternatively, if you want to buy a home that is not energy efficient, you can use an energy-efficient mortgage to help you buy it if you plan on making energy efficient improvements after you move in. In this situation, money to pay for the improvements is held in an escrow account until you move in and start making energy efficient changes.