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ENERGY STARŪ | ||||||||
For Your Home | ||||||||
Energy-Efficient Mortgages | ||||||||
Financing Home Energy Efficiency Improvements Energy-Efficient Mortgages Benefits of EEMs Financing Home Energy Efficiency Improvements Some energy efficiency improvements involve little or no implementation cost. There are also improvements that can cost a great deal of money. For example, replacing a heating system can cost up to $5,000 in a large house or even more if you are converting from electricity to another energy source. Installing new windows is another project that, while very beneficial to your home and the environment, can be a financial strain to implement. This is where energy efficiency financing comes in handy.
EEMs are offered by government and private institutions. The government agencies that secure this type of loan are the Federal Housing Authority (FHA) and the Department of Veterans Affairs (DVA). EEMs are also offered by private, secondary lending institutions such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Some independent mortgage companies also offer EEMs. Benefits of EEMs EEMs also come with special requirements. Most importantly, it is necessary to prove that the energy efficiency improvements are cost effective. There are two criteria for cost effectiveness:
The improvements must meet both of these criteria to be considered cost effective and qualify for an EEM. Most EEM lenders require an evaluation of the home's energy efficiency in order to qualify projects for a loan. The most widely accepted evaluation method is called the Home Energy Rating System (HERS). The HERS rating process is carried out by a certified rater or energy auditor. The HERS report identifies which improvements will be cost effective for the house and provides estimates of the monthly savings, the cost of the improvements, and the time it will take for the savings to pay back the cost. The first step in obtaining an EEM is to contact potential lenders. The most comprehensive information on the EEM program can be found at the Residential Energy Services Network (RESNET). RESNET is a national network of mortgage companies, real estate brokerages, builders, appraisers, utilities, and other housing and energy professionals. For more information click on www.natresnet.org. | ||||||||
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