Special financing available for energy-efficient homes
Though we’ve been enjoying a fairly lengthy period of low interest rates, the rising cost of homes still makes homeownership more expensive than ever. Homes that are energy efficient, however, may qualify for special financing programs.
The average homeowner spends more than $100 each month on utility bills, and during hot or cold weather, these bills go up significantly as energy use increases. Your monthly utility costs thus take a good-sized bite out of your budget, and money that might be used for other purposes instead pays utility bills.
A number of mortgage lenders offer financing programs that take this into account, giving home buyers incentives on homes that are rated as energy-efficient. The idea is that money saved on utility bills can be used toward the mortgage costs of a bigger or better house.
These mortgages give you credit in your home loan for the money you will save on your monthly utility bills. The result is that people can now afford “more house for less money,” and in some cases, they can afford a house that otherwise was out of reach. In fact, a study by the Environmental Protection Agency found that about 7 percent more families would qualify for home financing if the home were rated for an energy-efficient mortgage.
Most energy-efficient mortgage lenders require a home-energy rating to verify that the home meets certain minimum energy-savings standards. Anyone considering buying a home — be it a resale or new construction — should contact a local energy rater and have the home rated for energy use and efficiency. It is standard practice to hire home inspectors to make sure the plumbing, wiring and other home features are in good shape, and it is becoming more commonplace for an energy rating to also be performed on a new house.
You can find out about home energy ratings at fsec.ucf.edu/bldg/fyh/ratings. This site takes you to links for lists of certified home energy raters around the United States.
There are both government-insured and conventional energy-efficient loan programs offered around the country, as well as a number of programs in states. Programs are available for new homes and resale homes, and for homes that are already energy-efficient and those that you plan to make more efficient. If improvements will make the home more efficient, the cost of the improvements can be added into the mortgage, allowing you to pay for them over time at much lower monthly costs.
Also check out the Web site of the Residential Energy Services Network, natresnet.org/lenders/. RESNET is a national network of mortgage companies, real estate professionals, builders and others dedicated to making the nation’s home more energy efficient. The site has extensive information on energy ratings and mortgage programs.
There are several major programs available:
•FHA Energy-Efficient Mortgage, www.hud.gov (search energy-efficient mortgage).
•U.S. Department of Veterans Affairs, homeloans.va.gov/veteran.htm.
•Energy Star Mortgage, 1-888-782-7937.
•Fannie Mae, 1-800-732-6643, and Freddie Mac, 1-800-373-3343; both of these national corporations buy mortgages from other lenders and encourage lenders to offer incentives for energy efficiency.
When selecting a mortgage company to work with, choose one that has experience with home energy ratings and energy-efficient mortgages. Not all companies know about these programs.
One Final Note
According to a study in the Appraisal Journal, for every dollar saved on annual energy costs, a home increases in value $20. Thus, if you buy an energy-efficient home that has yearly savings of just $300 over a conventional home, your house would have an increased market value of $6,000. That’s a nice benefit in addition to the lower monthly utility costs.