Do You Know About Energy Efficient Mortgages (EEM’s)?

The world of energy efficiency is often fraught with gray areas. Systems and technologies that may work well for one home, in one climatic region, for one particular family, may not be the most efficient solution for other homeowners. The key to efficiency lies in a very precise analysis, often times through a professional energy audit, and subsequent customization of solutions to specific needs.

That means that while solar panels may be a viable solution in Texas, the same 2-story, 4-bedroom home in Minnesota may benefit much more from a high efficiency natural gas furnace. This cost-value balancing act is very much at the heart of holistic home sustainability. Since energy efficiency often results in economical savings, the tradeoff is generally related to time – either pay slightly less upfront while spending more in the long-term, or pay slightly more upfront and save big as time passes. Luckily, when it comes to rectifying efficiency with our collective need for instant gratification, there are a number of quick fixes, such as improved attic insulation, that materialize quick savings. However, when it comes to buying or refinancing a home, very few people are familiar with the concept of Energy Efficient Mortgages (EEM’s), also known as Energy Improvement Mortgages (EIM’s).

What is an Energy Efficient Mortgage (EEM)?

Utilities are the single biggest expense after mortgage payments, and as an additional cost consideration, can affect the affordability of a new or refinanced home. However, with a Federal Housing Authority (FHA) EEM, homebuyers can effectively get a larger loan to cover the cost of additional energy efficient features, such as additional insulation, while immediately savings bundles of money (thanks to minimized utility bills) from the get-go. Basically, EEM’s increase a homebuyer’s purchasing power when it comes to buying an energy efficient home, and credits the energy savings into the mortgage itself. This makes getting an EEM an economic no-brainer, provided that intelligent energy-efficiency measures are implemented.

Getting Energy Efficient Mortgages

The first step to getting an EEM is effectively the first step to any energy-efficient project – get a professional report on the property’s initial energy efficiency. For EEM’s, this energy audit is known as a Home Energy Rating Systems (HERS) report. A professional inspector will appraise the approximate value of the house, the cost of energy efficient improvements, and energy cost savings. EEM’s can be used in conjunction with the FHA’s 203(k). While FHA loans have limits, an EEM allows for the limit to be exceeded, provided the amount for the EEM is more.

An Energy Efficient Mortgage (EEM) recognizes that energy efficient homes ultimately cost homeowners less to operate than standard homes because they use less energy. This puts money back into the pockets of families while promoting the health of the environment. EEM’s are a bona-fide no-brainer when it comes to saving money and saving the environment, yet very few people actually take advantage of this win-win opportunity. The culprit? Ignorance. Most people simply don’t know about it. Let’s get the word out.

For more information, check out the FHA’s fact sheet on EEM’s.