Energy efficient mortgage (EEM) or green mortgage is a new concept that many environmentally conscious individuals have not even heard of. It's not a marketing effort. Instead, energy efficient mortgages are programs offered by many private agencies as well as the federal government to assist you make energy efficient improvements in your home. Simply speaking, EEMs are the mortgages that offer you the chance to borrow additional money that you can use to make energy efficient changes in your existing home. You can also make energy efficient upgrades to the new or the old home that you want to purchase. The energy efficient up gradation offers you a living space that is more environment friendly with less usage of cooling and heating resources. EEMs should also result into reduced utility costs. In a nutshell, green mortgages actually enhance the value of your home.
The idea of EEM was first introduced in the country in 1992 as a pilot project in 5 states. Later in 1995, this pilot project was extended to cover the entire nation. The underlying notion behind this program is that the reduced utility expenses allows the borrowers to pay for covering the costs of making environmentally friendly upgrades in the house. Anyways, with rising environmental consciousness, these are gradually becoming popular mortgage choice of many home buyers in the country.
Here we list down some specific improvements that may help you qualify for an EEM -
- Upgrades in the cooling and heating systems
- Insulating the walls, floors and attics
- Setting up environmentally-friendly windows such as dual pane
- Keeping environmentally friendly appliances such as refrigerators, dryers and washers in the house
- Installation of duct system
Different types of EEMs
There are 3 basic types of EEMs. Here the loan amount varies widely across lenders. Type of the loan, energy efficient improvement for which it is taken out etc are the important factors which determine the amount of the loan. Here are the 3 common types -
- Conventional EEM
Conventional EEMs are offered by the private lenders. As like other conventional loans, these loans are also sold by the private lenders to the Freddie Mac and Fannie Mae. Conventional EEMs are perhaps the most powerful EEM. Here, the homeowners get the chance to borrow up to 15% of the appraised value of the house for environment friendly home improvement purposes. - FHA EEM
These are federal loans and these are offered by the lenders that are approved by the Federal Housing Administration (FHA). FHA EEMs are relatively less powerful than the conventional EEMs but here you are entitled to receive the same benefits that are offered by usual FHA loans. Here you get the chance to borrow up to 5% of the approved value of the house for environment friendly home improvement purposes. - VA EEM
Like the VA loans, VA EEMs are offered to the veterans and spouses of the veterans for making energy efficient upgrades in their homes.
With growing environmental awareness, the demand for energy efficient mortgages is gradually rising. Lenders are also coming out to meet this demand.