There are cost effective mortgages for (a) homes that are energy efficient and (b) property owners who want to make their current property energy efficient. Energy Efficient Mortgages or Green Mortgages provide homeowners the opportunity to borrow money for upgrades to energy efficient levels in their properties. Renovations can include:
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Repairing or replacing the current chimney
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Installing passive or active solar technology
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Installation of a tankless water heaters
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Installing double paned windows
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Installing a modern HVAC systems
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Installing insulation
The idea is to encourage eco-friendly living spaces that use fewer resources for cooling and heating. Fannie Mae, the Federal Housing Administration and the Department of Veteran Affairs have green mortgage programs. Freddie Mac offers projected utility savings by taking upgrades into the equation when establishing loan amounts.
Types
While details may vary depending on mortgage lenders and companies, there are three distinctive types of green mortgages.
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Conventional EEM
Offered by lenders selling properties to Fannie Mae or Freddie Mac. Borrow up to 15% of the property’s appraised value to upgrade green levels
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Federal Housing Administration EEM
Borrow up to 5% of property value or $4,000, whichever’s greater. The maximum on the loan is $8,000
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Veteran Administration EEM
For past and present military personnel. If purchasing an existing property, allowed green upgrades of up to $6,000, regardless of property value
Eligibility
If your home is currently energy efficient, financing could be approved. Approval will also depend on the inspection rating. If the property needs some upgrades, improvement cost must be determined before contacting a lender. After an initial consultation, they’ll suggest a licensed energy rater to inspect the property. The rater will present a report in the form of a Home Energy Rating System, or HERS, which is provided to both homeowners and lenders. HERS costs between $300 and $800 and usually includes:
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Rating of property as is
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Recommendations for upgrades
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Estimated pricing, savings and life of upgrades
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Estimate of property’s rating after upgrades
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Before and after estimations of property’s annual energy costs
Advantages
Green mortgages are not second mortgages since it is rolled into a current mortgage and the owner continues making one payment. There are green mortgage with discounts on fees and/or interest rates for energy efficient certified properties.
Summary
A green mortgage is an excellent way for homeowners to save money in the long term and an incomparable way to change one’s footprint. You can get credit for existing eligible utilities. They also provide peace of mind to you, your family and your guests as you all benefit from a healthier environment.
Brentt Taylor is a staff writer of MortgageLoan.com. For 18 years of existence, the website has been providing news, articles and finance-related tools that aim to help consumers create smart financial decisions.