The Energy-Efficient Mortgage (EEM)

Did you know that you can save money by making your home energy-efficient? If you don’t have the money to finance the necessary renovations, take heart. Many lenders are now offering Energy-Efficient Mortgages (EEMs) to conservation-minded homeowners. These are specialized mortgages designed to help homeowners renovate and upgrade their homes for the express purpose of saving money by making the property more energy-efficient. Inquire at your local bank or mortgage broker about this very innovative home loan program.

In order to qualify for an EEM, your house must be rated for its energy usage. This energy rating evaluates the entire structure of the property, assessing the amount of energy used based upon the amount and type of insulation that the home has, the type of windows that are installed, even the kinds of appliances that are being used. It also takes into account the kind and quality of major energy-using components such as the cooling and heating systems. The better the quality of the structure and the less amount of air leakage in the ducts, the better the energy rating the house will receive.

There are several ratings that can be given for energy usage; be sure to ask your lender which one they require. One very common rating is the Home Energy Rating System (HERS). The person who performs the rating is either a certified rater or an energy auditor who gathers information from the property and inputs it into a computer program, which generates a report. This report is used to rate the house and give it a score from 1-100. Not only does this report assess the current energy usage of the house, it also provides suggestions on ways to improve the energy efficiency of the home. It will even detail the estimated costs, savings, and break-even points for each improvement.

To be eligible for the EEM, the proposed improvement must be cost-effective; in other words, the monthly savings realized from the property’s utility bills must be greater than the added monthly cost of the energy-efficient mortgage. Total savings must also be greater than the project’s total costs.

The actual loan process for an EEM is basically the same as that of a regular mortgage, along with the additional paperwork to determine the house’s rating eligibility. A facilitator can be used to make the unfamiliar areas run more smoothly for both the borrower as well as the lender. Once funded, the homeowner has between 90 and 180 days to complete the renovations. The loan amount, usually about 150% of the total cost of the improvements, is placed into an escrow account by the lender. As the contracting company completes the project, money is released to pay them.

The Energy-Efficient Mortgage is a great way to renovate and modernize your home, while at the same time conserving much-needed power resources. In addition to that, you also reap the reward of lower utility costs each and every month, for as long as you own the home. Over the years those saving can become quite substantial, even helping you along the way toward your financial goals.

blog comments powered by Disqus