The Inside Story on Energy Efficient Mortgages

Education & Training

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.

Comments (5)

Ron Brown NMLS #270845
NMLS ID: 40831 - Federal Way, WA

Welcome to ActiveRain, and congratulations on your first blog!

Be sure to check out the Active Rain for Newbies group @

It's full of good advice, and information on how to get the most out of AR.

Mar 11, 2010 12:26 PM
David Northup
David Northup - Aim RE Group Inc, Temecula Realtors® (AIM) - Murrieta, CA

Hello !

Congrats on your first post and welcome to the Rain!

Take a minute to check out this group and this post
Top 10 ActiveRain Tools for NEW MEMBERS and RainMakers. They should help get you on your way.

To get the most out of your AR experience remeber the following:

  • To accumulate points on AR your post must be 50 words or more (and upload a profile picture!)
  • "Long Tail keywords" & Tags will get you more "Google juice"
  • Be sure to post to appropriate channels, categories, groups, etc.
  • Have Fun!!

All the best.


Mar 12, 2010 01:27 AM
Sergio Rebollo Jr.
Real Estate TeamMates - Miami, FL

Welcome to ActiveRain. This is a great community to network with others as well a great place to learn from other's experiences and knowledge. I've enjoyed it; I hope you enjoy it as well.

Mar 15, 2010 02:16 PM
John Thomas
E3 Green HOMES - Boulder, CO
EcoBroker, MSEE, MBA

Thanks for the post on this important message and welcome to Active Rain. It will be interesting to see what the Retrofit America program does with EEMs. Hopefully, the lenders will get on board and promote them.

Mar 17, 2010 08:38 AM
Earth Advantage Institute
Portland, OR

Thank you all for the warm welcome!


John - Your question about Retrofit America is right on target.  One of our mandates is to create metrics to help measure energy efficiency and document the value of green building.  We expect to be working with Retrofit America through our Energy Performance Score (EPS) program, a miles-per-gallon style rating system for homes that allows direct comparison of actual energy consumption between homes (unlike HERS), as well as associated carbon emissions.  The EPS offers a great measurement tool for lenders to truly gauge the need for energy improvements and the post-improvement effectiveness of the retrofit.  You can see more on this here.  

Mar 19, 2010 06:56 AM