What’s a “green mortgage”? It is a term that many, even the most environmentally focused of us, have not heard before. And it’s not what you might think. It is not a marketing or public relations effort. It is a program backed by private and government mortgage programs designed to help you make your home more energy efficient.
Green, or “energy efficient” mortgages (EEMs), let you borrow extra money to pay for energy efficient upgrades to your current home or a new or old home that you plan to buy. The main idea behind these types of mortgages is very simple: energy efficient homes use less energy and are therefore less expensive to own. The result is a more environmentally friendly living space that uses fewer resources for heating and cooling and has dramatically lower utility costs.
People who have more efficient homes spend less per month on utility costs and theoretically should have more to spend on their monthly mortgage payments—and can therefore afford a larger mortgage. In fact, if you already qualify for your main mortgage, you will (in most cases) also qualify for an EEM. At this time, energy-efficient mortgages aren’t second mortgages. Though they are created separately from your primary mortgage, they are ultimately rolled into that primary mortgage—so you only make only one payment per month. If you are refinancing a mortgage for a home that you already own and you want to add some energy-efficient renovations, you would again get the EEM to be rolled into the new mortgage. And to make it even easier, especially if you are strapped for cash after the purchase of a home, you don’t have to make an additional down payment on the EEM.
EEMs are insured by the Federal Housing Authority (FHA) and the Veterans Administration (VA) (for past and present military personnel) and by the conventional secondary mortgage market (Fannie Mae and Freddie Mac). You get an actual EEM in the usual places: mortgage companies, bank, savings and loan associations and other lending companies.
So, What Kinds of Things Does an EEM Pay for?
The types of things that are covered include upgrades that you may have thought you couldn’t afford like double paned windows, tankless water heaters, modern HVAC systems and new insulation. An EEM can also pay for improvements like weatherizing, energy efficient heating and cooling systems, fixing or replacing a chimney, installing active and passive solar technologies and other upgrades.
Benefits of Upgrading of Renovating
Like most people these days, you probably already do your share of “green” practices like recycling and turning off the water when you brush your teeth. But you probably thought that really big things, like renovating or upgrading your home to make it more energy efficient were financially out of your reach.
According to mortgageloan.com, Here are a few facts that will give you an idea of how upgrading your home can help save you a lot of money and reduce your home’s carbon footprint:
- Overall, heating and cooling accounts for 50–70% of the total energy used in the average American home.
- 60% of the existing homes in the US are not properly insulated.
- Updating your home’s insulation can save you up to 20% on heating and cooling costs or up to 10% of your total yearly energy bill.
- Compared to leaky single-paned windows, even the most basic double-paned window can reduce energy use by up to 24% in cold climates during the winter and by up to 18% in hot climates during the summer.
- Programmable thermostats can save about 2% on heating bills and more than 3% on cooling bills. These numbers can translate into savings of up to $180 a year.
Green mortgages are a concrete way for families to both save money and make a large scale change in the way that they live their lives in regard to the environment. Green mortgages, either as part of a mortgage refinance or added on to a new mortgage, are a smart way to pay for energy-efficient features to your current house, a house that you plan to buy, or to get credit for the features that your new home already has.
Making your house more energy efficient isn’t just about helping the environment and saving you money. Energy-efficient homes are cooler in the summer and warmer in the winter, cost less to maintain, have lower monthly utilities costs and generally last longer. Overall, an upgraded home is more comfortable all around. This means not having to deal with drafts in the winter, not worrying about the cost of cranking the AC when company comes over, and having peace of mind that your children, pets, and older visitors will always be in a comfortable, healthy environment.
Whatever your reason for wanting to pursue this type of mortgage, the results are the same: a more comfortable, energy efficient, environmentally sound home that is cheaper to maintain and has lower monthly utility costs. Hopefully this guide has helped to give you an understanding of energy efficient mortgages. If you’ve ever suffered through extreme weather in an inefficient home, you can instantly recognize the value of these kinds of loans. Pursuing an EEM can help you to feel more in control of your budget, your environment and your family’s impact on the environment.
For more energy saving tips, check out our previous blog post Why it is Important to Live Sustainably.