What is an Energy Efficient Mortgage?

April 9, 2015 Written by  Comments Print
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Are you buying a home or looking to refinance the mortgage on the home you already own? Are you familiar with the idea of an energy efficient mortgage? This is a financing option that can help you pay for energy efficient improvements to your home. Learn how it works in our blog!

Energy efficient mortgages (also known as EEM) are available through the Federal Housing Administration's Energy Efficient Mortgage program.

How do they work?

Essentially, you finance the purchase (or refinancing of your home) and finance the cost of energy-saving, cost-efficient improvements through the mortgage. This means that “The Total amount of your mortgage is based on the value of your home plus the projected cost of energy-efficient improvements.” The idea is that because these improvements will save you money on your utilities in the long run, you'll have more funds available for your mortgage payments. So you're basically paying for the improvements over the duration of the mortgage as opposed to upfront (and out of the mortgage). This puts energy efficient improvements in the reach of many homeowners who otherwise might not be able to pay for them up front.

What kind of improvements can I make?

They key term here is “cost-efficient.” You can only make an improvement if it is going to pay for itself in the long run as a result of energy savings and reduced energy costs. Some improvements homeowners have made include:

  • Replacing the heating/cooling system

  • Adding insulation

  • Whole house air sealing

  • Appliance replacements

  • Adding active or passive solar technologies


“Almost anyone who has satisfactory credit, enough cash to close the loan, and sufficient steady income to make monthly mortgage payments can be approved for a FHA-insured EEM loan,” according to ENERGY STAR. Detached houses, townhouses, and condominiums (with certain restrictions) are all eligible for the program.


The maximum amount of an EEM mortgage you can put towards energy-efficient improvements is the less of 5% of:

  • the value of the property, or

  • 115% of the median area price of a single family dwelling, or

  • 150% of the conforming Freddie Mac limit.

Buying a New Home vs. Improving an Old One

EEMs are usually used to buy a new home that has already been ENERGY STAR certified. EEM is also used to refer to EIMs, which stands for Energy Improvement Mortgages. An EIM is used to buy an existing home that the buyer plans on improving with energy efficient upgrades. One great thing about EIMs is that they “include the cost of energy-efficient improvements to an existing home in the mortgage without increasing the down payment.”

How greeNEWit can Help

A Home Energy Rating System (HERS) provider or energy consultant has to conduct an audit of the home's energy efficiency, recommend cost-efficient improvements, and provide a report of estimated savings to you and your lender before an EEM or EIM can be approved. greeNEWit can conduct a home energy audit to help you get approved for an energy efficient mortgage. For more information, call us today at 866.966.7630!

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