A home’s efficiency is measured by a home energy rating. This rating is a benchmark system which allows prospective buyers to compare between the energy costs of various homes. The rating is conducted by a resident energy professional. This report helps the lender calculate the current present energy savings that are incurred.
The principle behind an energy-efficient mortgage:
A conventional energy-efficiency mortgage allows a consumer to increase the amount he can borrow by a dollar amount that is equal to the estimated energy savings. Under such a scheme the value of the loan adjusts the value of the home to reflect the value of energy efficiency measures.
A FHA energy efficient mortgage allows the borrower to add the 100% cost of cost-effective energy efficiency improvements in addition to the approved mortgage loan. However, in this case, the additional costs incurred should not exceed $4000 or 5% of the value of the home up to as maximum limit of $8000. These loans are available for both site built and manufactured homes.
The third form of energy efficiency mortgages is the Veterans Administration EEM. This special scheme is meant for military personnel, reservists, and veterans. The limit of a loan in this scheme ranges from $3000 to $6000.
How an energy efficient mortgage really helps:
The benefit of opting for an energy efficient mortgage is that it increases your buying power to buy an energy-efficient home or make improvements to an existing one. The debt to income ratio for purchasing an energy-efficient home is higher. This means that you get more money for the same income level. Though an energy efficient mortgage has higher repayments than a traditional mortgage, the savings incurred within the house manages to equalize this. The benefit of a scheme such as the EEM is that it can be used even on a home that has already been purchased but is energy efficient.
