Energy Efficient Mortgages
An Energy Efficient Mortgage (EEM) is a mortgage that credits a home's energy efficiency in the mortgage itself. Whether you are purchasing a new home or refinancing your current mortgage, EEMs give you the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage.
As the single largest housing expense after a mortgage payment, your utility costs can have a direct impact on how large a mortgage you can afford. You can save money on the cost of utilities by financing new energy-efficient items like heating and cooling systems, dual pane windows, insulation, water heater, sun screens, infiltration package and set back thermostats.These investments can end up saving you money through lower utility bill.On average, our energy costs increase 7% a year.
To get an EEM a borrower has to qualify for a mortgage and have a home energy rater conduct a home energy rating (HERS) before financing is approved. This rating verifies for the lender that the home is energy-efficient. The HERs technician checks for items like the efficiency of the heater/ air conditioner, water heater, insulation levels in your attic and walls, air ducts and leakage around windows and doors.The technician then produces a report of what improvements need to be made, the cost of the improvements and the monthly savings.
How the Loan Works
You can take out an EEM loan as a 15- or 30-year fixed-rate mortgage or as an Adjustable Rate Mortgage (ARM).On a purchase, FHA requires that you make at least a 3.5 percent cash investment on the property, based on the sale price. The total amount of your mortgage is based on the value of your home plus the projected cost of energy-efficient improvements. Because your home will be more energy efficient, you will save on utility costs and, therefore, be able to devote more income to the monthly mortgage payment. Your final loan amount can exceed the maximum FHA mortgage limit by the amount of the energy-efficient improvements.The amount available for energy-efficient improvements can be as much as 5 percent of the appraised value. The amount of the energy efficient improvements is then placed in an escrow account and released after an inspection verifies that the improvements are installed and the energy savings will be achieved.You can begin making energy improvements after the loan’s closing.
source:
Geoff Rooker
Certified Mortgage Planning Specialist
Peoples Mortgage
602-550-5626
LO license #0910943
BK#0904164
www.rookerteam.com
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