Although they represent a new concept to many prospective homeowners, energy efficient mortgages (EEMs) have actually been available for many years. In 1992, Congress conducted a pilot demonstration of EEMs in five states that would later expand into a national program (U.S. Department of Housing and Urban Development, 2009). *With EEMs, borrowers now have a way to finance cost effective, energy efficient measures as part of a single mortgage. Borrowers can also extend the debt-to-income qualifying ratios on loans. This in turn allows borrowers to qualify for a larger loan amount, making it possible for buyers to live in better and more energy efficient homes.
In addition to EEMs, energy improvement mortgages (EIMs) are also available. EIMs are aimed toward borrowers who would like to make energy efficiency improvements to existing homes. *These allow a borrower to make energy efficiency improvements to an existing home without increasing the down payment. The money saved from utility bills can be used to finance the energy improvements. *EEMs and EIMs are sponsored by federally insured mortgage programs, as well as the conventional secondary mortgage market.
In order to qualify for an EEM or EIM, a borrower must have a home energy rater conduct an energy rating. *This test will establish whether the home is energy efficient. Energy rating services provide a lender with the estimated monthly savings and the value of the energy efficiency measures that are to be implemented.
Although savings will vary from home to home, the implementation of energy efficient features into new or existing homes can save an owner hundreds of dollars each month. *In fact, adding features such as solar panels and residential wind turbines has allowed some green mortgage holders to generate more electricity than they use, effectively freeing them of monthly electric bills altogether. In some cases, companies will pay homeowners for giving unused energy back to the grid.
Beyond lowering monthly utility bills, an EEM can save homeowners in other ways. *Homeowners with EEMs are eligible to receive tax credits from the federal and local governments to help cover the cost of energy efficient features. The implementation of energy efficient measures may also increase a property's resale value, as well as make a home more attractive to potential buyers.
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