With many homeowners spending so much more time at home, many are discovering their living spaces may not be as comfortable as they once thought. Poor energy efficiency in a home can cause all types of issues - most can be easily fixed, but sometimes come with an upfront price tag that most homeowners don’t have cash on hand for.
Whether you need to switch out your single paned windows, upgrade insulation or install a new HVAC system, an Energy Efficient Mortgage may be just what you need.
Windows are responsible for almost 25% of annual heating and cooling costs. In some cold climates, double-paned windows can reduce energy use by up to 24% in the winter and up to 18% in hot climates. Additionally, updating your home’s insulation can save you around 20% on heating and cooling bills while technology, such as programmable thermostats, can translate to almost $200 in savings per year on heating and cooling bills.
Energy Efficient Mortgages can be applied for when you’re doing any of the following: building energy upgrades into a home you plan on purchasing or building; increasing the value of a home you are trying to sell; or retrofitting your current home with energy improvements. If you qualify for a home loan, you should be able to qualify for one of these mortgages.
Not only will these types of mortgages allow you to pay for energy upgrades that have a high upfront cost but will ultimately save you money in energy bills in the long run. Over time, these investments will provide a lower monthly utility bill, deliver a healthier space for your family to quarantine in, and demonstrate a more environmentally friendly home.
According to mortgageloan.com, there are 3 main types of Energy Efficient Mortgages. Talk to your lender and see if you qualify.
- Conventional Energy Efficient Mortgage: This type of loan is offered by lenders who sell their loans to Fannie Mae and Freddie Mac. It is the most powerful of the EEMs as it allows you to borrow up to 15% of the home’s appraised value for improvements.
- FHA Energy Efficient Mortgage: This type of EEM does not let you borrow as much as a conventional EEM, but you will be able to take advantage of the benefits of FHA financing. You can borrow up to 5% of whichever of the following is the least: a) your home’s appraised value; b) 115% of the median area price of a single family home; or c) 150% of the conforming Freddie Mac limit for that area.
- VA Energy Efficient Mortgage: This version of the EEM is for qualified veterans and present military personnel and may be used only when purchasing or refinancing a home. As part of your home purchase/refinance loan, it allows you to borrow up to an additional $6,000 for energy efficient upgrades if the projected energy savings exceed the resulting increase in mortgage payments, or $3,000 based solely on the documented cost of the improvements themselves.