Energy Efficient Mortgages (EEM Mortgages) and Energy Improvement Mortgages (EIM Mortgage)----What a Concept!!!!
Believe it or not but, energy-efficient mortgages have been available since the 1980's. They are known as an EEM, the mortgage combines a traditional loan product with ongoing savings related to ernergy-efficient improvements. The best part is that the energy-saving measures must save more money than the increase in monthly mortgage payment from adding the cost of the corresponding efficiency improvements. As we all know with the increase in energy prices...this will be easy to do!
EEMs are used to finance new homes with energy-saving enhancements while an Energy Improvement Mortgage (EIM) finances energy the 'improvements' in an existing home.
There are no special requirements to qualify for an EEM or EIM. All those who can qualify for a home mortgage can also qualify for an energy loan but it is a little trickier.
EEMs take energy savings ($$$ actually saved monthly) into account when determining loan limits. Buyers of more energy-efficient homes can qualify for up to 10 percent more mortgage than would otherwise be possible. In this market, that is a HUGE bonus!! The lender looks at the entire picture of payments for mortgage and utilities when evaluating an applicant. Qualified energy efficient imporvements include, among other things, new windows, furnaces, additional insulation, energy-saving lights and appliances.
Recent statistics show that 58 percent of the greenhouse gas emissions in Minnesota are attributable to construction and operation of buildings. As we look towards a 'greener' future, anyway we can cut the amount of waste and start living more efficiently is a step in the right direction.
The energy used in our homes for heating, cooling, and lighting accounts for 20 percent of all greenhouse gas emission in the United States, according to the Envitonmental Protection Agency. In reality, that means we need to be more conscious about turning off lights, leaving the TV on or keeping the heat up to high. Simple actions can make a big difference for the environment and our pocket books.
In addition to reducing greenhouse emissions, energy-efficient homes are more comfortable. Unlike turning down the thermostat, newer, more efficient building products and techniques save energy while providing expected creature comforts. Living here in Minneapolis, MN...we all know that a 'constant' level of heat can be an underappreciated 'given' that other parts of the country may not fully understand.
Much of the real estate on the market in the Twin Cities is older and was built without an emphasis on energy savings. As fuel costs increase and a slowed real estate market has people staying for the long term, energy efficiency will become more important. become more important. We are already seeing an increase in the number of families choose to Remodel or put an addition onto their Minneapolis Home, as opposed to moving. I believe this is a GOOD sign of a reality for the Minneapolis Real Estate market accepting the realities of today.
As more people decide NOT to list their home and add on or remodel, the Minneapolis Real Estate market will be able to recover quicker to a 'balance' between buyers and sellers. This balance is the key for a 'healthy' stable price point and market.
Lenders as well as homeowners have begun to look at the full cost of owning a home, including operating costs. Utility costs may eventually be more of a burden than the monthly mortgage payments as energy costs increase, asuming that homeowners locked into a 30 year low interest loan in the past several years. Coming off the coldest and longest winters in recent memory, all Minneapolis residents should be thinking about how we can use Green Financing (EEM Mortgages and EIM Mortgages) to help use save on our pocket books AND live more comfortable.
HOW TO GET an EEM or EIM Mortgage
The first step to getting an EEM or EIM is to find a lender that offers them. The next step is to have a qualified professional do a comprehensive evaluation of the energyuse in the home, or prospective home. ( Buying a new home in Minnesota does not necessarily assure energy efficiency.) The reality is most builders in the recent past have 'cut corners' to make their profits larger. Luckily, with the forward thinking Minneapolis Real Estate mentality, Green Living is becoming almost a level of 'chic'. Green Financing is a way to ensure the proper level of effecieny of your home.
A Home Energy Rating System (HERS) is the only way to evaluate a home's efficiency. Several nonprofit agencies and companies in the Twin Cities are certified as third-party evaluators for HERS. These are not cheap tests, but there are some cities beginning to offer inspections at limited costs to the home owner.
Once the homeowner has the HERS evaluation, for an existing home, he or she is responsible for getting bids to make the energy imporovements suggested by the evaluator. The improvement plan and costs are submitted to the lender, and the money for the work is put into escrow. Typically, the escrow period is about 6 months.
After the improvements have been completed, the rating professional returns to inspect and verify that the energy improvements were done correctly. The bank then closes the loan and release the improvement money as with any other mortgage. The cost of a HERS inspection for and existing home runs $400 to $600, which can usually be included in the mortgage amount.
In an effort to sell more new homes, some builders are paying for the HERS evaluation, which saves the buyer the $500 to $900 cost to evaluate new construction. The perception among builders is that the buyers are becoming savvier about the ongoing operating costs for a home.
Some builder believe that energy efficiency is one of the few things selling right now. It can help sellers qualify and differentiate their homes in a sagging market. This is especially true in the Twin Cities Real Estate market.
For more information on an EEM Mortgage, EIM Mortgage or the HERS evaluation, please feel free to contact me, Ben Coulter, at Uptown Financial Corp, Ben@UptownFinancial.com or 612-216-1388. We are proudly located in Uptown Minneapolis Minnesota.
Resources:
http://www.natresnet.org/ (Residential Energy Services Network)
http://www.energystar.gov/ (Environmental Protection Agency)
http://www.spnec.org/ (St. Paul Neighborhood Energy Connection)
Article by Kim Carlson with EarthSmart Consumer
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