Does this sound like you or someone you know? You’re tapping out your resources to purchase an older home, you know your gas and electric bills are going to be through the roof, but you don’t have the money for energy upgrades.
There’s a solution, and it’s called an energy-efficient mortgage (EEM). With an EEM, your lender may be able to get you up to $8,000 specifically for improvements that will lower your energy bills. That’s money above and beyond the mortgage amount you qualified for, folded in to your regular monthly payments. It’s used to make improvements that will lower your bills by more than their costs raise your mortgage payment, as determined by a licensed professional called a HERS (Home Energy Rating System) Rater.
Here’s how the process works:
- You contract with a HERS Rater (you can find one at https://www.resnet.us/directory/search) who does a comprehensive audit of the home’s energy features and creates a software model of the home’s energy use.
- Based on that information, you and the Rater discuss recommended improvements. Typical items the EEM might cover include replacing an old furnace or installing a ductless heat pump if the home has electric baseboard or wall heaters, upgrading an old hot water heater, and adding attic insulation. (Don’t even think about using an EEM to replace windows! Contrary to popular opinion, they don’t have a major effect on your heating bills – it can take as much as 100 years to recoup the cost.)
- You get bids from contractors to perform the work, and decide who you’d like to use. Then the Rater incorporates the improvements, costs, and loan information into the software model and produces an Improvement Analysis Report, showing you and your lender which improvements are the most cost-effective.
- Your lender escrows the EEM funds at closing and releases them to pay for the work over the next 60 days. The Rater’s fee is usually included in the EEM as well.
EEMs aren’t new, and they can be included with Fannie Mae, Freddie Mac, FHA, and VA mortgages. Talk to your lender to see if an EEM can work for you!