Environmentally friendly mortgages, or green mortgages, offer many financial advantages for the savvy home buyer. You may have never heard of this kind of mortgage, but it results in lower utility bills, and allows you to finance more, getting you more house for your money. Getting a green mortgage is a little more work, but you may decide it is worth the trouble.
What Exactly Is A Green Mortgage?
Green Mortgages are unlike standard mortgages because, in a green mortgage, utility costs are considered in deciding how much a buyer can finance. Lower utility bills mean that a buyer can put the extra income toward paying off the mortgage, so the buyer is then approved for a larger mortgage.
To obtain a green mortgage, a specially qualified inspector provides an energy inspection of the home, in order to calculate the monthly savings gained through environmentally friendly building materials and appliances. The energy used by all appliances, by the furnace and air conditioner, and the quality of insulation and roofing, are all factors considered during the inspector’s assessment. The amount of money saved is considered an addition to the buyer’s income to determine the amount of financing the buyer has available.
Sometimes, the home for sale is not yet energy efficient, and the buyer obtains a green mortgage in order to make environmentally friendly improvements on the home. In these situations, the energy inspector calculates what changes can be made to the home, the cost of these changes, and how much money they eventually will save.
Why Be Green?
Most people who choose green mortgages do so because of personal beliefs about protecting our environment. However, if you have never considered yourself an environmentalist, green mortgages still offer many advantages. They facilitate you to get more house for your money, save money in energy costs over the long term, and if you just barely miss qualifying for a mortgage, a green mortgage may just be what you need to get approval.
Your heating and cooling costs will be more stable, and environmentally friendly houses may have a higher resale value, and sell more quickly. And many states offer tax breaks or tax rebates for energy efficient homes. An internet search can quickly let you know what incentives are available in your state.
Four Kinds of Green Mortgages
There are several types of green mortgages available. Buyers looking for a home that is already environmentally friendly can apply for a standard energy-efficient mortgage (EEM). Those who desire to take an existing house and make it environmentally friendly will need an energy-improvement mortgage (EIM). Buyers who can only offer a small down payment may qualify for a Federal Housing Administration (FHA) EEM. There is even a green mortgage program for veterans.
How Much Will You Save?
The amount of money you save in an environmentally friendly home varies depending on numerous factors, including:
People living in states with extremes of weather will save more money than those in more temperate states.
- Home Size
Utility bills are always higher in a larger home, but the overall savings may be greater.
Even with renovations, older homes may be less energy-efficient.
- Financing Costs
If you are using a green mortgage to improve an existing home, remember that your improvements will end up costing more because of interest payments. It may be more financially prudent to save up and pay cash for home improvements.
You may be unable to locate a lender that deals in green mortgages, but don’t worry, you can still save money by being energy-efficient. Any house’s efficiency can be improved in a variety of ways, and home energy audits are available to anyone, if you need professional help to make your house more environmentally friendly. Sometimes these services are even available for nothing from local utility companies. The federal tax credits for energy efficient homes are available to all homeowners, whether or not they have a green mortgage.
Green mortgages may not be exactly common yet, but don’t let that make you afraid to request one. And remember that you should be just as careful in applying for a green mortgage as you would be with a standard mortgage, and always read the fine print and consult a real estate attorney. Getting a mortgage is a huge financial decision so shop around to make sure you are getting the best rates. Keep in mind that green mortgages aren’t only for environmentalists. Everyone benefits from lower energy costs.