What’s an Energy Efficient Mortgage (EEM)?

Did you know the average home costs the homeowner about $1,900 per year in utility costs? Of course, this depends on the area of the country, the climate, the number of people in the household, etc., but this is the average cost – yours may be higher or lower.

OK, so maybe you already knew that, but did you also know that an energy-efficient home (as rated by a licensed home energy rater) can save you as much as 10-15% per year in utility costs? It’s true! By taking some simple steps based on your home energy audit, such as sealing the duct openings or having a professional install insulation in the walls and attic, you can begin to realize an immediate monthly reduction in your utility bills.

So let’s get to the part where an EEM can help – whether you’re buying, selling, remodeling, or refinancing a home, you may be able to benefit from one of the many programs currently available. Not to mention, commercial owners may also be able to benefit from some of these programs. Be sure to check with your local lender and ask about these programs. If they can’t offer them, they should know of another lender who can, or feel free to check my website (www.cybergreenrealty.com) or send me an email at: timcahill@avenue3re.com and I will be more than happy to help research and find a lender for you.

Some of the available programs are:

  • Fannie Mae – Up to 15% of the mortgage total may be allocated to energy-efficient improvements with no affect on your loan-to-value ratio.
  • FHA – Borrow up to 5% of the loan-to-value amount for energy-efficient improvements, not to exceed $8,000 or less than $4,000.
  • Energy Star Mortgage – If your new home is 30% or more energy efficient than the Model Energy Code guidelines, you may qualify for an Energy Star mortgage. The benefits of this mortgage are: Allows up to a 2% “stretch” in the allowable debt-to-income ratio by the lender, as well as at least one of the following incentives:
    • A lower interest rate;
    • A discount on closing costs or origination fees; and/or
    • May pay for the cost of the initial home energy audit.
  • Utility financing may also be available in your area. Check with your local banks, non-profits, or other organizations to see what alternatives may be available.

Why such good deals? Because it’s in EVERYONE’S best interest for homes to be more energy-efficient:

  • Homeowners benefit from the reduced utility costs and healthier indoor environment;
  • Home Buyers can get more home for their money;
  • Home Sellers benefit because they have a documented energy audit report they can use as a marketing tool to distinguish their home from others;
  • Lenders benefit because the home (their collateral) is more cost-effective and valuable to them;
  • Utility companies can invest in more research of alternative energy methods because the demand for them is increasing.

So whether you’re a buyer or a seller, remember:

  • Energy efficient homes cost less to maintain
  • Buyers can get more home for their money with an EEM
  • Buyers can get a slightly higher loan amount to cover costs
  • Sellers can distinguish their home with a home energy audit

And don’t forget to speak with your accountant to see what other tax breaks you may be eligible for after the improvements are complete!


One response to this post.

  1. Tim,

    Very nice post. I am interested in these loan products. I am a real estate investor and a real estate agent. I am doing several remodel projects. I am interested in finding different ways to get my buyers qualified and find a market niche.

    I’ll continue to watch your blog and I’ll look for you on twitter.

    Justin Pierce
    Snow Goose Homes LLC


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