Leverage Your Mortgage: Go Green As a New Home Buyer
In light of changing environmental concerns, it’s natural to wonder how we as individuals can help the planet. For many of us, that starts with our homes. And there’s good news: there are ways we can make changes that are likely to save money in the long run, and a mortgage that can help get you there.
Conventional Loans for New Home Buyers
As you’re touring a new home, you may find places that suit your budget but aren’t quite up to the environmental standards you’d prefer. For instance, you might be interested in high efficiency heating and cooling systems, ENERGY STAR rated windows, or even solar panels. While some of these additions can be costly, the government offers energy efficiency incentives that could apply to your conventional 15 or 30-year mortgage in the form of the Energy Efficient Mortgage (EEM).
In order to obtain these funds, you’ll need a home energy assessment, per the U.S. Department of Housing and Urban Development.
That assessment consists of:
- Recommendations of energy-saving improvements for the Borrower’s consideration
- Estimate of the money each improvement will save in energy costs, and
- Estimate of the cost to make each improvement.
When the mortgage lender has the energy report above, they can use that information to determine how much each improvement could save homeowners, and the borrowing power of the buyers can be increased without additional down payment funds. HUD considers improvements “cost-effective” when they save the homeowner as much, or more, than the cost of the initial improvements.
Benefits of Going Green
Besides the knowledge that your house is doing the best it can for the planet (and the lower utility bills that come with it), there are other financial benefits to having an eco-friendly home. According to HUD, “You may get a larger tax deduction with the EEM because the interest on a mortgage is tax deductible. This can save you more money than paying for energy upgrades with a credit card, bank loan, or cash, none of which are usually tax deductible.”
In addition, the energy efficient improvements can make you eligible for a higher loan-to-value ratio on your mortgage, essentially putting a larger loan within reach. Because the efforts to “go green” will be saving you money over time, and are also likely to add value of the property in the future, an EEM offers a way to take immediate advantage of the upgrades.
For more information on mortgage options to help you go green, contact us today.