Saving the Planet (and Your Wallet) One Home at a Time
Let’s be honest—homeownership is expensive. But what if your home could save you money while also saving the environment? Enter the Energy-Efficient Mortgage (EEM), the financing tool that makes going green more affordable. Whether you’re buying a home with eco-friendly features or planning to make upgrades, an EEM can help you roll the costs into your mortgage instead of draining your savings.
So, how do these mortgages work? And more importantly, how can they help you turn your home into a lean, green, energy-saving machine? Let’s break it down.
What is an Energy-Efficient Mortgage (EEM)?
An Energy-Efficient Mortgage allows borrowers to finance the cost of energy-saving home improvements as part of their mortgage loan. This means you can invest in upgrades like solar panels, better insulation, or high-efficiency HVAC systems without needing a separate loan.
These mortgages come in two main types:
- Purchase EEMs – For buyers purchasing a home that already has energy-efficient features or for those planning upgrades.
- Refinance EEMs – For homeowners looking to improve their existing home’s energy efficiency by refinancing their mortgage and rolling the upgrade costs into the loan.
Pros and Cons of Energy-Efficient Mortgages
Pros:
✅ Lower Utility Bills – Save on electricity, heating, and cooling costs from day one. ✅ Increased Home Value – Green homes often sell for more than traditional homes. ✅ Better Loan Terms – Some lenders offer favorable interest rates for EEMs. ✅ No Need for Extra Loans – Avoid the hassle of personal loans or credit cards for home upgrades.
Cons:
❌ Appraisal and Inspection Required – An energy audit is needed, which can add upfront costs. ❌ Higher Initial Loan Amount – Your mortgage balance increases to cover improvements. ❌ Limited Awareness – Not all lenders are well-versed in EEMs, so finding an expert is key.
Pro Tip: Choose a lender who specializes in EEMs to ensure a smooth process and maximize benefits.
Types of Energy-Efficient Mortgages
Different loan programs offer EEM options, including:
1. FHA Energy-Efficient Mortgage
- Backed by the Federal Housing Administration (FHA), this allows borrowers to finance up to 5% of the home’s value (capped at $8,000).
- Ideal for first-time homebuyers looking to add energy-efficient upgrades without large upfront costs.
2. VA Energy-Efficient Mortgage
- Available to eligible veterans and military service members.
- Can finance up to $6,000 in energy improvements with no additional down payment.
- Best for veterans looking to make long-term savings on utility bills.
3. Conventional Energy-Efficient Mortgage
- Offered by Fannie Mae and Freddie Mac.
- Allows borrowers to finance energy improvements up to 15% of the home’s appraised value.
- More flexible than government-backed loans, but underwriting requirements vary by lender.
Pro Tip: Work with an energy rater to determine the best upgrades and loan options for your home.
What Energy Improvements Qualify?
Not every new appliance or renovation qualifies for EEM financing. Approved upgrades usually include:
- Solar panels & solar water heaters
- Energy-efficient HVAC systems
- High-performance windows & insulation
- Smart thermostats & lighting systems
- Tankless water heaters
Pro Tip: An energy audit will determine which upgrades will provide the most savings—required for most EEM programs.
How to Get an Energy-Efficient Mortgage
Step 1: Find an EEM-Approved Lender
Not all lenders offer EEMs, so look for one familiar with green financing.
Step 2: Get an Energy Assessment
A certified energy rater will evaluate the home and estimate potential savings.
Step 3: Get Pre-Approved
Once your lender confirms eligibility, they’ll pre-approve your mortgage with the added EEM financing.
Step 4: Close on Your Loan and Make Upgrades
After closing, the funds for energy improvements will be held in escrow until the upgrades are completed.
FAQs
Q: Can I use an EEM to add solar panels after I buy a home? A: Yes! You can finance solar panels and other upgrades as part of an EEM, either during purchase or via refinance.
Q: Do EEMs require a higher credit score? A: Not necessarily—FHA and VA EEMs have the same credit score requirements as their standard mortgage counterparts.
Q: Can I combine an EEM with other home improvement loans? A: Typically, no—EEMs are designed to cover energy-efficient improvements only. For other renovations, a home equity loan might be better.
Final Thoughts: Green Homes, Smart Financing
Energy-Efficient Mortgages offer a win-win: they help homeowners reduce energy costs while financing eco-friendly improvements without upfront cash. Whether you’re buying or refinancing, an EEM can make your home greener, more efficient, and even more valuable.
If you’re interested in making energy upgrades to your home, talk to a real estate agent or loan officer about EEM options. A greener home is just a mortgage away!
