The Energy Mortgage - One Key to Unlocking Residential Energy Efficiency

If you were shopping for a home and found one that was well-built, comfortable, had lower-than-average monthly energy costs, and required no additional income to pay for it, would you stop shopping? Although most prospective homebuyers would jump at such a chance, the tool that can make such a purchase possible–the energy mortgage–is still unfamiliar to many homebuyers and even to many real estate agents.
 
An energy mortgage increases a consumer’s buying power by enabling mortgage lenders to count the monthly energy bill savings that a home’s energy efficiency features deliver as additional income. There are two kinds of energy mortgages: energy-efficient mortgages and energy improvement mortgages.

The energy-efficient mortgage credits the savings from a home that is already efficient into the loan qualification process and capitalizes the improved features into the appraisal. An energy improvement mortgage increases the buying power of a consumer by financing energy improvements that are shown to be cost-effective and capitalizing the ensuing monthly savings into the mortgage loan. All of the national secondary mortgage markets--conventional as well as federally insured programs--offer energy mortgage products.
 
Both types of energy mortgage programs rely upon a home energy rating to calculate the savings generated from a home efficiency features. Home energy ratings involve an inspection of a property’s energy features–its insulation , windows, condition of heater/domestic hot water heater, for example--by a specially trained residential energy efficiency professional, known as a home energy rater. (To find a rater that is certified by a home energy rating organization accredited by the Residential Energy Services Network (RESNET), visit RESNET’s national directory of accredited home energy rating organizations at www.natresnet.org/accred/registry.htm.)
 
When a prospective homebuyer has an energy rating performed on the home he or she is planning on buying, the energy rater inspects the house and then feeds information on the home’s energy features into a rating software program. The computer program then projects the home’s energy consumption, monthly utility costs, and gives a uniform score of one to one hundred based on the home’s relative energy efficiency. The computer program also recommends cost-effective measures the homebuyer can undertake, their projected cost to install, their estimated energy savings, and an economic analysis. Based on the inspection and computer analysis, the energy rater recommends cost-effective improvements and projects the installed costs and the monthly projected savings. The consumer decides what improvements he or she wants done and identifies a contractor to install them. The prospective homeowner then takes th...