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As more consumers look for ways to do their part for the environment, interest is growing in “green” or Energy Efficient Mortgages (EEM). Green mortgages are part of a plan designed by government and private lenders to improve the energy efficiency of homes. They can be utilized for building new homes from the ground up, for purchasing existing homes or as part of a refinance. Green mortgage loans aren’t second mortgages. Although they exist separately from your primary mortgage, the balances are calculated together, meaning you’ll make only a single payment each month.
How Green Mortgages Work
According to the terms, green mortgage loans allow extra money to make energy efficient upgrades to your existing home or the home you’re thinking of buying. Funds may be used to install double-paned windows, modern heating and cooling systems, green insulation or tankless water heaters. Green mortgages benefit both homeowners and the environment. Bringing older homes up to modern energy use standards results in reduced carbon emissions and lower utility bills. Major improvements including solar panels or wind turbines may eliminate electricity costs altogether.
Green Mortgages are Cost Effective
If you’re like most people these days, you probably try to do your part to help the environment, including recycling renewable materials and trying to conserve water. For many homeowners, a major renovation to improve overall energy efficiency may seem financially impossible. A green mortgage is an affordable way to get the immediate benefits of upgrades while spreading the costs out over time. Since improved energy efficiency can dramatically cut heating, water, gas and electricity costs, a green mortgage loan may actually pay for itself.
Consider the following energy facts:
• Installing basic double-paned windows can reduce heating and cooling costs by up to 24 percent in the winter and 18 percent during the summer months.
• Energy-rated dishwashers may save up to 1,200 gallons of water per year.
• Outdated and inadequate insulation is found in approximately 60 percent of American homes.
• Old or improperly maintained ductwork accounts for 20 percent of energy loss in homes with central air and heating.
• Installing a programmable thermostat can reduce cooling costs by more than 3 percent and heating costs up to 2 percent, resulting in around $180 in savings each year.
Benefits of Energy Efficient Mortgages
In addition to cutting utility costs and reducing your carbon footprint, there are other rewards for investing in the future with a green mortgage loan. Energy efficient homes have lower maintenance costs. Reduced energy loss means indoor environments are generally more comfortable in every season. Improving the energy efficiency of your new or existing home may also qualify you for tax deductions on your federal and state returns.
Qualifying for a Green Mortgage
As with any other mortgage loan, the qualifying process requires your lender to use your income to calculate your maximum monthly payment and the amount you may borrow. In the case of an EEM, an inspector will visit the property and make a report outlining expected energy savings from planned improvements and an estimated cost to install them. A certified auditor will then verify the home’s energy rating, and the lender will approve the report.
If you’ve always wanted to live an environmentally friendly lifestyle but thought major home improvements were out of reach, an Energy Efficient Mortgage may be the solution you’ve been looking for.