Energy Efficient Mortgages
Energy Efficient Mortgages -- or EEMs -- enable homeowners to finance a spectrum of different energy-efficiency improvements. The federal government does this primarily through Federal Housing Authority (FHA) and Department of Veterans Affairs (VA) programs, which are essentially loan guarantees. An alternative option is made available through the ENERGY STAR program, which provides certification that may make it easier to acquire favorable terms from participating private lenders.
EEMs encourage homeowners to finance energy-efficient improvements with their existing mortgage. Under an EEM, the FHA insures the underlying loan, which naturally makes lenders more inclined to extend financing for your project. Note that EEMs may provide a more affordable financing option relative to private loans because interest payments on equity-backed loans are tax deductible. Always check with a tax professional before considering taking out a loan.
Federal Housing Authority (FHA)
Eligible technologies include passive solar space heat, solar thermal and PV for residential applications (plus many other types of energy-efficient home improvements). Loan amounts are permitted up to 5% of appraised home value or $4000 (whichever is greater), up to $8000.
Department of Veterans Affairs (VA)
Eligible technologies include passive solar space heat, solar thermal and PV for residential applications, (plus many other types of energy-efficient home improvements) for veterans. Loan amounts up to up to $3000 are allowed provided documentation of costs or a bid are submitted. Other info: If the costs savings of the project are projected to be greater than the overall increase in monthly mortgage payments, eligible homeowners may borrow up to $6000. VA loans are subject to several other requirements and a loan amount may, at the discretion of the VA, be increased in value.
ENERGY STAR EEMs
Unlike FHA and VA programs, Energy Star mortgages are not guaranteed by the federal government. In a nutshell, the program coordinates with 50 or so private lenders who, provided the applicant is purchasing a home with the Energy Star rating, offer homebuyer assistance and special financing. For more information, and to find a lender in your area, visit the Energy Star loan website.
Related reading:
Federal Tax Credits Energy Efficient Mortgages |
