With summer in full effect, millions of American families are spending a lot of time outdoors. What better opportunity to talk about two loan products that can be used to make energy efficient improvements to your home?
Not only can these products help make your home more energy efficient, they can also raise your property’s value while saving you money.
The FHA 203K will finance homes and renovations up to the local FHA loan limit. When it comes to green mortgages, some borrowers can receive up to $50,000 in financing for improvements to solar heating, electrical systems, geo-thermal heating and cooling systems. Naturally, all these improvements help homeowners slash their energy costs and reduce usage.
Energy Efficient Mortgage
EEM or an Energy Efficient Mortgage is a smaller home loan that has been available for years but it’s rarely taken advantage of. Energy Efficient Mortgages are available as add-ons to VA and FHA loan products (including 203K loans) for home purchases and refinancing. They allow a borrower to leverage an additional 5 percent of their home’s value (capped at $8,000 for FHA and $6,000 for VA loans) to finance energy efficient improvements.
Save Money & The Planet
The beauty of the EEM home loan is the added debt incurred in your monthly payment is excluded from your qualifying ratios. The idea behind EEM’s (and all green home loans) is the amount saved in energy costs will be more than the increased mortgage payment.
Your lending institution will require an independent certification of projected savings prior to closing. They will also hold the monies in escrow, until the work is completed and inspected. But besides that, Energy Efficient Mortgages are fairly easy to navigate because they don’t alter your required documents or qualifications.
Some of the common uses are: replacement windows and doors, increased insulation, upgraded oil burner, conversion to gas heat, central air, sun lights, small solar panels – or even energy saving appliances.
With prospective home buyers placing more emphasis on energy efficiency – look into a green home improvement loan if you are selling an older home. Also if you are buying an older home, remember both of these products can be enacted at the time of acquisition or during a refinance period.