Energy efficient mortgages are giving environmentally conscious buyers an excellent way to live their dream of owning an energy efficient home. Whether you’re buying a new energy efficient home, or remodeling your existing home, you could save significant money by applying for an energy efficient mortgage. To help you get started on your road to a sustainable home, we’re breaking down the hows and whys of energy efficient mortgages.
How Energy Efficient Mortgages Work
If you’re buying an energy efficient home, you can credit the value of the home’s energy efficiency to the mortgage. For example, if you’re estimated to save $5,000 per year on utility bills, your lender can increase your reported income by $5,000 so you qualify for a larger loan.
Energy efficient mortgages are also available to buyers who’re purchasing a home and then making green upgrades. If you’re taking out a $100,000 mortgage to purchase a $150,000 home, you can have an energy assessment done to identify ways to improve the home’s efficiency. Let’s say the assessor recommends spending $5,000 on upgrades. The lender might then increase your mortgage to $105,000. Your monthly payment might rise by $15, but you’ll also save $25 on your monthly utility bills.
Types of Energy Efficient Mortgages
Most buyers who’re interested in these loans choose traditional energy efficient mortgages. They’re used to finance energy efficient upgrades in an existing home or to increase the loan value you qualify for when buying a new home.
Buyers also have the option of applying for an FHA energy efficient mortgage. The FHA gives lenders the authority to add up to 100 percent of the cost of green improvements to an existing loan with few limitations. This type of loan is available to anyone who meets certain income requirements, so long as the lender trusts the borrower can make monthly payments.
Applying for Energy Efficient Mortgages
In order to qualify for an energy efficient mortgage, buyers need a professional home energy rater to visit the property and grade its energy efficiency. The home energy rater reports back to the lender with information on how much you’ll save on yearly utility costs thanks to the home’s energy efficiency. The report can also include recommendations on how to improve energy efficiency, and the estimated costs and savings for each of the improvements. The lender then uses this information to determine if you qualify for an energy efficient loan, and if so, how much the loan is worth.
Borrowers also have to provide income, employment, and debt information to lenders just as they would when applying for a standard mortgage.
Energy efficient mortgages benefit sellers, buyers, and current homeowners. By making it easier to buy green homes, and add energy efficient upgrades to existing homes, energy efficient mortgages afford people the opportunity to live a green lifestyle while also saving significant money.
If you’re interested in saving the planet, some cash, and also owning the home of your dreams, energy efficient mortgages are an excellent avenue to explore.