Green Industry Articles

The Energy Efficient Mortgage: A Resurgence

Just when you think energy efficient mortgages and tie-dyed t-shirts are a thing of the past – they're back! But you don't have to wear love beads to take advantage of Energy Efficient Mortgage (EEM) and Energy Improvement Mortgage (EIM) programs.

EEMs apply to homes that already meet a higher energy standard. This may be a new energy efficient home that is Energy Star qualified or meets the National Association of Home Builders Green Standard or the U.S. Green Building Council's LEED (Leadership in Energy and Environmental Design) rating. Or it may simply be a very efficiently built home.

EIMs are available for homes needing energy improvements, with the costs of these improvements added to the mortgage. An EIM is not a second loan. Although the monthly mortgage payments increase, the overall cost to operate the home declines due to lower utility bills. Meanwhile, the world wins through conservation of precious resources.

So what are the typical improvements? The usual suspects include insulation, new windows, new heating and cooling systems, and energy-efficient lighting and appliances.

With the "normalization" of lending practices with crazy conditions like verified income, down payment and reasonable credit, the energy-efficient option creates more leverage. The EIM "stretch" allows a buyer to purchase more home for the money. To qualify, the home needs to be tested through the Home Energy Rating System (HERS), which shows the savings that would result from energy-efficient improvements. The savings are added to the borrower's income on conventional-type loans. Two percentage points are added to the qualifying ratios for Federal Housing Administration loans or Veterans Administration loans.

The good – and bad – news is that in many markets, home prices are down. Rates are very low.

And now with the EEM or EIM lift, homes are even more affordable. Energy improvements make that affordability even more attractive.

Realtors® with NAR's GREEN Designation know the importance of energy efficiency and the EEM and EIM options. To find a rater in your area, go to the Residential Energy Services Network webpage at www.natresnet.org.

Be sure your lender knows about and offers EEM and EIM mortgages. Tie-dyed t-shirt optional.

Dave Porter is a national speaker, trainer and writer on green and energy efficiency construction, marketing and lending. He is a certified trainer for the NAR GREEN Designation as well as the NAHB Certified Green Professional Designation. He can be reached at 206-304-8228 or at davep@porterworks.com.

Source: Green REsource Council Newsletter, March 2009