During the past week, I’ve had several questions about HERS Ratings and Mortgages. I thought I would put up some of those answers in posts this week. Something fun to do while I do my Combustion Appliance Class.
Q: What can an Energy Efficient Mortgage Do?
A: An Energy Efficient Mortgage (EEM) allows the lending agency to allow a larger amount to be loaned to the buyer. It is allowed because the efficiency results in lower costs for utilities. The decreased cost of utility payments enables a home buyer to afford an increase in P&I payments, and many times leaves savings available to the home owner for other expenses.
One example of an Energy Efficient House would be one that was built to Energy Star Standards. An Energy Star House should be worth more, than an otherwise comparable home, at re-sale time.
Another example would be where the homeowner had upgraded various energy efficient features over the years. This improved house should be worth more because the homeowner installed a 92 or 94 AFUE Furnace instead of a 78 or 80 AFUE furnace. Other energy efficient items could be insulation, triple pane windows, a tank less hot water heater, an Energy Recovery Ventilation System and/or others.
Q: What is the difference between an Energy Efficient Mortgage (EEM) and an Energy Improvement Mortgage, (EIM)?
The EEM is designed for a home that was originally built to a higher efficiency status or one that has been upgraded to the efficient status prior to the time of sale.
The EIM is for the home that requires improvement to the energy efficient features. In the case of an EIM the lender places the additional amount of loan proceeds in escrow. The improvements are implemented and the contractors are paid from the escrow. Any amount remaining after all bills are paid is used to pay down the principal.