(EEM) Energy Efficiency Mortgage

What Are Energy Efficient Mortgages (EEMs)?

Would you like to save money on your mortgage while helping to reduce carbon emissions? If so, an Energy Efficiency Mortgage (EEM) may be right for you.

While most EEMs are used to purchase a new, ENERGY STAR qualified home, there are various types of Energy Improvement Mortgages (EIMs) used to purchase homes that will have improvements done to them. All homes must have a home energy rater conduct a home energy rating in order to qualify for any Energy Efficient Mortgage.

Conventional Energy Efficiency Mortgage- Lenders who sell loans to Fannie Mae and Freddie Mac can offer these types of loans. A Conventional EEM allows the lender to increase the borrower’s income to reflect the estimated savings in energy. Fannie Mae also adjusts the home value to reflect the dollar value of the energy efficiency.

            Requirements: Must have a home energy rating to provide the lender with the Energy Savings Value. This is the value of the energy improvements, along with the estimated monthly savings in energy.

FHA Energy Efficiency Mortgage-   Lenders may add 100 percent of the cost of energy efficiency improvements to the already approved mortgage. These federally insured loans are available for manufactured as well as site-built homes.

            Requirements: Additional costs must not exceed $4000 or 5 percent of the home value. You must submit application to the local HUD Field office through an FHA-approved lending institution.

VA Energy Efficiency Mortgage- These federally insured mortgages are for purchasing an existing home. The dollar amount for energy improvements caps at $3000-$6000.

            Requirements: Must be a qualified military personnel, reservist, or veteran.

Energy Star Mortgages- A pilot program that includes the cost of Energy Efficiency Improvements in loans. You pay over the life of loans and deduct interest from state and federal income taxes. You are able to make these improvements, resulting in a more energy efficient home, while the loan remains the same amount as a typical mortgage. Some lenders even provide reduced loan fees, assistance with closing costs, and discounted mortgage rates.

            Requirements: Energy Star qualified, single family (1-4 families), owner occupied, and must undergo Home Performance rating to show at least 20% energy savings.