According to a recent survey by U.S. News & World Report, more of today’s buyers and homeowners are interested in the benefits of obtaining a “green” mortgage. The survey found that buyers are finding energy-efficient mortgages attractive because they allow homeowners to roll the cost of “green” home improvements – such as solar panels, geothermal heating, tank-less water heaters and more energy-efficient heaters or air-conditioning systems – into their mortgage financing.
Fannie Mae, the Federal Housing Administration (FHA) and the Veterans Administration (VA) offer loan programs that include energy-efficient mortgages. The loans come with a few restrictions, however. On FHA loans, the cost of improvements usually can’t exceed 5 percent of the property’s value and is capped at $8,000 while with VA loans, veterans can usually add up to $6,000 in energy-efficiency improvements. On conventional loans, funding for energy improvements is often capped at 10 percent of the appraised value of the completed property.
Craig Barrett, co-founder of NBI Properties in Fort Walton Beach, Florida, said his realtors have been fielding more questions lately from buyers interested in green mortgages.
“Right now we’re getting more questions and interest in energy-efficient mortgages because it’s tax-season and buyers are looking for deductions,” he said. “They want to know how much they can lower their taxes by making certain improvements or buying a home that qualifies as energy-efficient.”
Lending experts warn borrowers to be make sure they’re comfortable with the higher monthly mortgage payments spurred by a bigger loan. But over the long-term, the decrease in a home’s energy costs may make up the difference. In fact, many lenders won’t even process an energy-efficient mortgage unless it will result in a net cost savings. Often the savings can be significant because the average homeowner spends about $2,200 annually on energy bills, according to the Department of Energy’s Energy Star Program. The Environmental Protection Agency says that adding insulation and improving the sealing of a home has the potential to curb total energy costs by 10 percent.
According to Energy Star, programmable thermostats can save homeowners $180 annually; replacing single-pane windows can offer a $500 annual savings; solar water heaters offer a $140 savings; and energy-efficient HVAC systems can offer $200 or more in savings.