Financing Greener Housing

Having a greener home is not only better for the environment, but it can save your household a lot of money on energy, water, construction, and even groceries. Finding the initial starting money for a greener home, however, can be tricky. Taking out a second mortgage is expensive, and may not give you the flexibility to make improvements in small steps. Fortunately, there are several ways to finance greener construction.

EPA Funding

The EPA has several programs designed to help individual homeowners improve the “greenness” of their homes. There are thousands of available grants, loan programs, and tax credits that this agency offers to individual home owners as well as to developers who are willing to incorporate some environmental improvements into their designs. Awards are given for things such as incorporating geothermal heat, installing a recycled water system, and installing solar panels. Opportunities vary by area and other factors, so visit their website to determine which grants, tax credits, or loans you are eligible for.

In general, the grants offered through this program require a homeowner to fill out an application in which they will explain the nature of the improvements. There is a different application for each program. Some grants are offered directly through certified contractors. This means that you will recive the money as a credit on your bill from the contractor, but you will not have to apply for these grants on your own. The tax credits that are offered are taken as deductions on your federal taxes.

Energy Efficient Mortgages

An Energy Efficient Mortgage or EEM is a type of mortgage that gives a buyer extra purchasing power by calculating in the savings the homeowner will gain through energy efficiency. EEMs can give borrowers the chance to get financing for cost-effective, energy-saving improvements. By factoring in the reduced energy costs, a household is able to stretch their debt-to-income qualifying ratio on a mortgage. This allows borrowers to qualify for a larger mortgage and a more energy-efficient home.
In order to qualify for an EEM, a borrower usually has to have a home energy rater from Energy Star conduct a home energy rating on the property he or she is hoping to purchase or refinance before the mortgage is approved. While these mortgages are usually used to purchase previously certified Energy Star certified homes, they can be used to purchase or refinance any property. These mortgages are offered through VA programs, FHA programs, and many conventional lenders.

The easiest way to go about qualifying for an EEM is to purchase a home that already has an Energy Star rating. If you want to build from the ground up, however, it is possible for you or your contractor to have an Energy Star inspector visit your property and rate your house.

Regular alternatives

It is also possible to finance an energy-efficient home on your own. Taking out a conventional home equity line of credit will allow a homeowner to improve the energy efficiency of his or her loan in small stages (Read More>>).

These loans function in a manner similar to a credit card in that a homeowner can choose how much to borrow of the total line of credit that he or she is offered. This means that a homeowner can withdraw come money, make improvements, and then pay off some of the loan before planning their next project. This method is ideal for people who want to improve their existing home rather than move.

It’s also possible to take out a traditional construction loan. This type of loan is offered to people who are building a new home. The loan is typically given out in sections as each phase of work on a new house is completed. Once construction is complete, the loan reverts to a traditional mortgage. By using a construction loan, it is possible to completely control the “green” features that are built into a home, and customize these features to the individuals who are living in the house. These loans can be combined with the Energy Star mortgages that were previously mentioned once construction is complete and the house is Energy Star certified.

More on Going Green from The Green Living Guy:

Green Lighting by Seth Leitman, Brian Clark Howard and Bill Brinsky

Do-it-Yourself Home Energy Audits by David Findley