Energy Efficient Mortgages
When you are buying, selling, refinancing, or remodeling your home, you can increase your comfort and actually save money by using an Energy Efficient Mortgage (EEM). It is easy to use, federally recognized, and can be applied to most home mortgages. EEMs provide the borrower with special benefits when purchasing a home that is energy efficient, or can be made efficient through the installation of energy-saving improvements.
Ideally, it is best to get your home energy audit completed when you order an appraisal through your lender or mortgage broker. This way, the HERS Rating can be performed and verified while other aspects of your loan are being processed. Getting the energy audit completed promptly also helps prevent delays in your loan closing.
You may also get a larger year-end tax deduction with an EEM because interest on mortgage payments is tax deductible. This fact means you can save additional dollars by rolling the costs of your energy audit, retrofits, and upgrades in your mortgage, versus paying with a credit card, check, or cash – none of which are usually tax deductible.
Does your home qualify for upgrades or an EEM?
All buyers who can qualify for a traditional home loan can also qualify for an EEM. Energy Efficient Mortgages can be done on most homes. Availability is not limited by location, home price, or utility company. EEMs can be done on government (FHA and VA), conventional, and jumbo loans to name a few. Your lender or mortgage loan officer will help you choose which loan type is best for you.
With the Energy Efficient Mortgage, lenders will recognize the projected monthly savings that any home energy retrofits or upgrades will yield. In turn, borrowers can use these savings like recieving extra disposable income each month. By adding the cost of upgrades into your EEM, your home’s energy upgrades can be paid off easily as part of your monthly mortgage payment.
The other EEM option is for the lender to stretch your debt-to-income qualifying ratios. By so doing, the lender can help you expand your borrowing power to qualify for a larger loan amount. However, we strongly recommend you consult with your mortgage loan officer about qualifying ratios if you are near a limit, and it is never a good idea to buy more house than you can afford – even if it is energy efficient!