Sure, you can (and should) do the little things to green your home, like installing a programmable thermostat and turning off the water while you brush your teeth -- but the actual savings aren't huge. At least, not when you consider the savings you could be getting from bigger renovations. For example, just updating your home's insulation can save you up to 10% on your total energy bill per year. And replacing outdated windows can save more than 15% on your total energy bill. Those numbers can really add up.
While most people recognize that major renovations are the way to go, they simply can't afford them (or they assume they can't). Even though the upgrades end up paying for themselves over time, the initial costs are prohibitive.
Fortunately, there are a few programs that will lend you the money to invest in green technology. The basic idea behind all of them is that the energy-efficient renovations will reduce your monthly utility payments -- which in turn frees up more money each month to put towards loan payments. In the end, you're paying the same (if not less) per month for utilities -- not to mention the savings to the environment.
Here are three of the main options for getting financing for green home investments:
Sometimes called a "green mortgage," an Energy Efficient Mortgage is a loan that gives you money that is earmarked for energy-efficient upgrades to your home. It covers a variety of things from HVAC systems to new windows to insulation.
You apply for an EEM at the same time that you seek out a primary mortgage or refinance your mortgage. An EEM is not a second mortgage, but rather a loan that is rolled into your primary mortgage -- so you only pay one bill per month.
EEMs can be utilized in a variety of ways. You can get one during a mortgage refinance to upgrade an older home. You can get one when purchasing a home to make upgrades before you move in. You can also get one when purchasing a brand new home that already has energy efficient upgrades in place as a way to get more money on your loan.
The process for getting an EEM involves having a certified rater come to your home to assess what energy-efficient upgrades it needs. You choose the upgrades that you want, depending on how much money you are eligible for, and then hire a professional to complete the renovations within a set amount of time. Check out this handy guide for more info on EEMs.
PACE, which stands for Property Assessed Clean Energy, is like an EEM in that you get money for energy-efficient upgrades to your home. However, instead of rolling the loan into a mortgage, the loan is paid back by increasing your property taxes at a set rate over a term of 15 to 20 years.
Unfortunately, the program was seriously handicapped in September when Fannie Mae and Freddie Mac began requiring that homeowners who held PACE loans pay them off entirely if they refinance their mortgages or sell their homes.
Though the Obama administration has supported PACE programs and the Department of Energy has awarded more than 150 million in federal funds, the program is largely in limbo. Some states, like Maine, are going ahead with PACE loans, but the program has been mostly halted. Still, there is enough public support that it is likely that the program will be revisited in the very near future.
The HUD 203K Program allows a person to buy a home or condo that is in need of renovation or modernization with just one mortgage loan. Usually, if you are buying a home that needs major work to make it habitable, you need to obtain financing to purchase the home, additional financing for rehab, and then a permanent mortgage when the work is done. With a 203K, you can just get one loan that pays for everything. This total loan is based on the projected value of the property with the work already completed, taking into account the cost of the work and related fees.
Here's how a 203K Loan is green: aside from being able to use the money to pay for green upgrades, all renovations must comply with HUD's Cost Effective Energy Conservation Standards. These standards are spelled out on the site, but include things like weather stripping, insulation, and an updated HVAC system.
The little things really do add up. However, if you are looking to make major changes for your home, your wallet, and the environment, it's worth it to look into these three financing options.
Below are some resources to help you to get more information on these programs:
JR Hevron is a Brooklyn-based writer and editor. He recently created a guide to Energy Efficient Mortgages for MortgageLoan.com.
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