Green Mortgages
For home buyers, a green mortgage is a very good new financing opportunity, as incentives for energy-efficiency upgrades increase and costs of new green energy technology are coming down.
A green mortgage, or energy-efficient mortgage, is different than a conventional mortgage, as it allows borrowers to finance certain green energy improvements at the same rate and terms with their home purchase. For home buyers this means that they can make environmentally-friendly and energy saving upgrades in their home sooner than the zoning rules will mandate and acquire the highest green energy star certificates for their home. In the same time, they will significantly be reducing their monthly energy costs, and the value of their home will increase significantly.
Home Energy Upgrades in Green Mortgage
If a home needs various energy-efficient upgrades, like the majority of the houses, it is advantageous to finance them with a green mortgage. With an energy-efficient mortgage, home buyers can finance beyond the typical construction improvements, also energy saving appliances like green boiler, energy saving air conditioning, heat pumps and more with the latest green energy oriented technology.
The U.S. Department of Housing and Urban Development, that offers energy-efficient loans, cites the example of a couple who buys a home for $150,000. They could get an FHA loan for 95% of the property’s value.
The Inflation Reduction Act
The Inflation Reduction Act makes green improvements very advantageous for home buyers. As an example, in a home that needs a new air conditioning unit, instead of replacing it outright, a buyer may instead install a heat pump and roll the cost into a green mortgage.
The homeowner would be very likely eligible for significant tax credits and rebates for this green improvement, and depending on income, that could amount from 50% to 100% of the appliances cost.
Green Mortgage Requirements
Requirements for green mortgages vary between financial institutions, of course.
In general, the available energy financing is 15% of the completed value of the property, which is the appraised value of the home once the upgrades are finished. The value of the house after the green upgrades and acquirement of high star green energy certificates is significantly increased, which means in money terms the financing is more attractive to home buyers.
Normally for a green mortgage to be approved, it will need typically the home’s energy assessment by a trained professional who will analyze the home’s energy usage and recommend energy-saving improvements. The evaluation projects the cost and potential savings for each improvement. Additionally, homeowners have to be committed to find contractors and complete the green upgrades work of the existing structure in an agreed period of time, generally three to six months.
In general, most lenders are able and very positive to offer green mortgages.
Green Mortgage and refinancing
A new option for existing homeowners looking to make energy-efficient upgrades is the refinancing with a green mortgage to include the cost of the green upgrades.
Home owners can refinance and roll the green improvements into the mortgage. If their interest rate is already 5-6%, the new rate would be around the same, while very likely they are eligible to sizable amount in tax incentives and direct rebates under the Inflation Reduction Act and more State green incentives.
