Climate change is causing governments around the world to think of new ways to reduce emissions. In the US, housing incentives are becoming popular among homeowners. This article will go over one of the best ways you can help finance efficiency upgrades to your home, save on monthly utility bills and more.
Energy Efficiency Mortgages
Energy Efficient Mortgages (EEM) allows you to increase the amount of money you can borrow when you invest in efficiency improvements to your home. For those who qualify, you can combine the cost of these improvements with your monthly mortgage cost.
There are a few different ways to use an EEM: labor, equipment, inspections, and solar and wind technologies qualify as home efficiency improvements. EEMs are basically an add-on program that increases the amount you can borrow from a lender.
For new home buyers, an EEM can help you afford a more expensive home. So you don’t even need to be a current home-buyer to take advantage of an EEM. Lenders will take into account the lower monthly utility costs of an energy-efficient home, meaning you can afford a higher monthly mortgage payment.
Loans That Work With An EEM
There are three types of loans that work alongside an EEM: a conventional loan, FHA, or VA loan. A conventional loan is a mortgage not supported or insured by a government agency. FHA loans are insured by the Federal Housing Authority, and the VA loan is insured by the US Department of Veterans Affairs.
The most common conventional loans are offered by Fannie Mae and Freddie Mac. Although both of these loans are similar, there are a few differences. Let’s take a closer look at some of these differences.
Fannie Mae Vs. Freddie Mac
The first basic difference between Fannie Mae and Freddie Mac loans is the maximum amount for energy and water improvements without a report or inspection. Fannie Mae’s maximum amount is $3,500, and Freddie Mac’s is $6,500.
Fannie Mae’s EEM is called a HomeStyle Energy Mortgage. Fanne Mae makes anyone interested in this loan get an energy assessment done by a Home Energy Rating System. The HomeStyle Energy Mortgage includes weatherization improvements like air and duct sealing, insulation, window and door replacements.
Freddie Mac’s EEM is called GreenChoice Mortgage. Like Fannie Mae’s EEM, Freddie Mac also requires you to get an energy assessment. However, the total cost of improvements to skip the energy assessment is $6,500. So it’s a higher threshold to reach compared to Fannie Mae’s EEM.
Even though you can skip these energy assessments, it’s a good idea not to because you can find out the most affordable areas of your house that you can make improvements. Both Fannie Mae and Freddie Mac allow you to combine the costs of energy inspections and updates into your purchase mortgage.
Greener Living
Take advantage of government incentives that will help make your current or future house more energy efficient. It doesn’t take a lot of extra work and you could help lower your monthly utility costs as well.
