Now, more than ever, it’s possible to stop wasting energy and be rewarded handsomely for doing so. Whether you’re refinancing your home with an Energy Efficient Mortgage, getting a rebate from your local utility for purchasing an Energy Star appliance or earning a tax credit when you install a new boiler, the savings are immediate, and over the long term, substantial.
When you buy, sell, refinance, or remodel a home, an Energy Efficient Mortgage (EEM) will save you money while making your home more energy efficient and comfortable.
An EEM offers additional leverage to buyers of energy efficient homes by increasing the debt to income ratio to 30% from 28%. This qualifies you for larger loan on a better home. Your mortgage payment will be slightly higher, but you will actually save money because your energy bills will be lower.
This win-win formula also applies when you refinance or remodel your home to make energy saving upgrades.
How do I determine if my current home or a new house I’m looking at is energy efficient?
A Certified HERS (Home Energy Rating Systems) Rater can provide an evaluation of your home or a prospective home purchase. The RESNET web site provides a Certified Rater Directory.
A HERS report includes the overall score of the house as is, recommended cost effective energy upgrades, annual total energy cost before and after upgrades, and the improved rating score.
A HERS rating usually costs between $100 and $300. This could be paid for by the buyer, seller, lender, or real estate agent. Sometimes the cost of the rating may be financed as part of the mortgage. No matter how the rating is paid for, it is a very good investment because an EEM could save you or your buyer hundreds of dollars each year.
Energy Efficient Mortgages are offered or guaranteed by various Federal agencies. The FHA (Federal Housing Administration) covers upgrades for new and existing homes and is now available in all 50 states. The loan amount is $4,000 or 5% of the property value up to $8,000.
The FHA 203(k) program enables a home buyer or investor to obtain a single loan to finance both property acquisition and complete major improvements after the time of loan closing. This can be used in conjunction with the FHA mortgage mentioned above but the total cost of improvements must exceed $5,000.
The VA Energy Efficient Mortgage is available to qualified military personnel, reservists and veterans in all 50 states for energy improvements when purchasing an existing home. This program is also available for VA refinance. Upgrades of $3000 may be financed based solely on documented costs and up to $6,000 may be financed if upgrades are deemed cost effective.
You may get a larger tax deduction with the EEM because the interest on mortgage payments is tax deductible. This can save you more money than paying for energy upgrades with a credit card, bank loan, or cash, none of which are usually tax deductible. Your lender will be your best source of information on your own EEM benefits.
Now that you’ve started to shovel money back INTO the window, let me show you two more piles of cash just waiting to be scooped up.
Many utility companies offer rebates on selected Energy Star Appliances. PG&E of California offers a $75 rebate on clothes washers, $300 to $600 for evaporative cooling systems and $200 to $400 on natural gas furnaces.
On top of that, the Federal Government wants to give you a $300 tax credit for a new central air conditioner or heat pump. How about $500 for insulation and sealing?