By: Ken Wright
Technologically speaking, our society has advanced by leaps and bounds on the efficient use of energy, whether it be about how much electricity a piece of equipment can use or about how much solar heat can be trapped to warm a home. However, energy-efficient technology is still a far cry from the ordinary experience of buying a pair of AA batteries off the shelf. Solar panels, double-paned windows, tankless water heaters, modern HVAC systems, radiant heat barriers, and improved insulation are still high-ticket items, whose high costs are offset by savings made over the course of time.
Homeowners can benefit from these energy-efficient measures by applying for a special mortgage loan – a Green Mortgage – known officially as an Energy Efficient Mortgage (EEM).
An EEM? For what?
An EEM is not a second mortgage – it is actually a loan on top of your primary mortgage, separately created to purchase energy efficiency upgrades for your home. The EEM is combined with your primary mortgage, making you pay for one monthly mortgage payment.
If you are already doing the 3R’s – Reduce, Reuse, and Recycle – then you will probably be interested in getting a green mortgage. Think about the following:
- * The Department of Energy reports that an average American home spends as much as 41% on heating and cooling costs.
* Leaking air ducts can increase heating and cooling bills by as much as 30%.
* Energy-efficient windows are expensive compared to standard windows, but the former offers significant savings in energy bills and reduction in heating and cooling needs.
* An energy-efficient home costs less to maintain – you can save up to 20% on your heating and cooling expenses.
* Finally, an energy-efficient home provides a safe and healthy home for you and your family by reducing exposure to mold, pollen, dust mites, radon, and other health risks.
The Department of Energy says that simple energy efficiency programs can lessen energy bills by as much as 40%. These savings can be used for food, clothing, education, and health. Savings can also be used to pay for higher mortgage payments.
How does an EEM work?
An energy-efficient home makes for lower utility payments. And on such a premise that the idea of a green mortgage was born.
A green mortgage literally hits two issues with one solution: an energy-efficient home makes for a sustainable life, reducing our impact on the environment and at the same time, enabling us to lead healthier lives.
To qualify for an EEM, you have to qualify first for a regular mortgage loan. The green mortgage on top of the regular mortgage loan means a larger mortgage – more purchasing power for you. Green mortgages are insured by the Federal Housing Authority (FHA), the Veterans Administration (for former and current military personnel), and by Fannie Mae/Freddie Mac.
The Department of Housing and Urban Development computes that for an EEM made with the FHA, you can qualify for 33% debt-to-income ratio, compared to 29% for a mortgage made without EEM. You can thus afford a more expensive yet energy-efficient house. The consequent savings in utility bills can be used to pay for the higher mortgage payments.
Sustainability can be clearly achieved with an energy-efficient home. And an EEM obviously enables homeowners to benefit from existing sustainable technologies.