Living green has many great advantages but we all know it can come at a cost. Often times we just can’t afford to make those energy efficient retrofits to our home. No matter how bad we wanted those double pane windows, we continue to put it off because we lack funds for the project. However, what most people don’t know is that they can potentially finance their green passion and still come out ahead financially.
Enter Energy Efficient Mortgages! Here is the official lowdown: “An Energy Efficient Mortgage (EEM) is a mortgage that credits a home’s energy efficiency in the mortgage itself. EEMs give borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans thereby allowing borrowers to qualify for a larger loan amount and a better, more energy-efficient home.”
Follow these steps to fund your green home project by refinancing with an EEM:
1) Get a Home Energy Rating Systems Report
The first thing you will need to do is get the home inspected by a professional Energy Rater. The Energy Rater will inspect the house, looking at appliances, windows, roofing, basically anything that will have an effect on your energy consumption. After his inspection, he will rate your house on a scale of 1-100. The lower the score, the more energy efficient the house is. The Energy Rater will also give you a report on the upgrades that can be performed to give your home a better score, and an estimated score with those upgrades. These upgrades can potentially be funded through your mortgage loan.
2) Talk to a Loan Officer
With your Home Energy Rating Systems Report completed, it is now time to start looking for a mortgage lender. When talking with a lender, the first thing you should do is tell them you are interested in an Energy Efficient Mortgage. If the lender offers Energy Efficient Mortgages, then they should be able to help you find a loan that fits your needs. Just like with any major purchase, make it a point to talk to multiple lenders. This will help you to find the lowest rates, and get the most information possible before making your final decision.
3) Choose the Loan that is Right for You
Using the findings from the inspection, your lender will be able to determine if you qualify for the Energy Efficient Mortgage. When the lender calculates what you are capable of borrowing, he will take the savings from your energy bills into account. The beauty is… in most cases, even with a higher mortgage loan, you will be spending less per month than if you were applying for a traditional mortgage. This is because your mortgage payment plus your energy bills will be less with an Energy Efficient Mortgage than with a regular mortgage. These savings mean you can afford more, which means that you can in turn afford to get a larger mortgage in order to fund your green upgrades. Even better, once you have paid off your loan, you will be able to enjoy the savings that the green upgrades bring!
In addition, Energy Efficient Mortgages are also available when purchasing a home, and offer the same advantage of being able to get a bigger loan. The steps are the same, find your dream home and get it inspected, talk to a loan officer, and finally choose the loan that works the best for you. This is a great way to make the home you find fit your green lifestyle.
About the Author: Mike Ciocca is an author for the Total Mortgage Blog. Total Mortgage is an online lender offering some of the lowest mortgage rates in the U.S.