Energy efficiency is a huge selling point when it comes to modern homes. There are many benefits of living in an energy-efficient home, including a higher quality of life, lower utility costs, and higher appraised home values. In addition to making a home more comfortable, energy-efficient homes include benefits like tax incentives.
Buyers and homeowners can make energy-efficient upgrades to newly purchased homes through the use of an energy efficient mortgage. This mortgage helps borrowers purchase an energy-efficient home or finance energy-efficient improvements to an existing home.
Conventional energy efficient mortgage
The HomeStyle® Energy mortgage is a conventional mortgage from Fannie Mae that allows you to use up to 15% of the “as-completed” value of the property for energy improvements. Covered improvements include:
- Energy efficiency
- Water efficiency
- Renewable energy
- Home resilience/natural disaster readiness
This can all include smart thermostats, water-saving toilets, energy-efficient windows and doors, solar panels, and retrofitting home foundations.
FHA energy efficient mortgage program
If a homeowner needs help saving money on their utility bills but cannot finance energy-efficient improvements themselves, the FHA’s energy-efficient mortgage program can help. Under this program, buyers can get their homes improved right away, and sellers can make their homes more affordable and sell faster.
When a borrower qualifies for a loan to buy or refinance a home, the FHA insures the loan to protect the lender against loss in the event of a payment default.
Getting an energy-efficient mortgage
To get an energy-efficient mortgage, a borrower will need an energy assessment on the home. This task is completed by a home energy rating system rater (HERS), who is certified to evaluate a home and complete a Home Energy Rating assessment to determine if the home is already energy-efficient or after improvements are completed. Then, they will provide the lender with the Energy Savings Value—the estimated monthly energy savings and the value of the energy efficiency measures.