If you own your own home, staying cool during Minnesota’s blistering summers and keeping warm through bone-chilling winters can really take a toll on your pocket book. According to the U.S. Department of Energy, the average household spends at least $2,000 a year on energy bills—over half of that for heating and cooling.
While there are many different ways to make your home more efficient—insulation, new appliances, window upgrades, and programmable thermostats—they require money up front before the energy savings begin. That’s a challenge for many families across the country. What if you could roll the cost of efficiency upgrades into your mortgage and starting saving money immediately?
ENERGY EFFICIENCY MORTGAGES
The U.S. Department of Housing and Urban Development and the Federal Housing Administration offer a program that lets homebuyers and homeowners include the cost of efficiency upgrades in their home mortgage or refinancing package. An Energy Efficient Mortgage (EEM) doesn’t require a separate qualification process or an additional down payment, and unlike a second mortgage, doesn’t put an additional lien on your property. They’re low hassle too: EEMs are separate from your primary mortgage but the payments are combined.
Financing through an EEM can help you replace an old heating or air conditioning system, add additional insulation to your home, switch to energy-efficient windows, and more. Once the upgrades are in place, you’ll start saving energy immediately. And even though your monthly mortgage payments will increase slightly, the energy savings outweigh those extra dollars.
HOW DOES IT WORK?
All buyers who qualify for a home loan are also qualified for an EEM. Once you’re qualified, an efficiency professional will come to your home, analyze its energy efficiency through a series of tests, and prepare a Home Energy Rating System (HERS) report. The HERS report will rate your home on a scale of 1 to 100—the lower your score, the more efficient your home. The report also recommends the most cost-effective upgrades to your home and estimates how much money you’ll save. Your lender will then be able to tell you the size of EEM you’ll receive (the maximum size of the loan varies, but it usually falls between 5 to 15 percent of your home’s value).
If your home needs an efficiency upgrade, but you’ve been putting it off because you can’t afford it, an EEM is a great option. You’ll save money, increase the potential resale value of your home, and live more comfortably in the meantime.
Michael Ciocca is an author for the Total Mortgage Blog. Total Mortgage is an online lender offering some of the lowest mortgage rates in the United States.