Green Mortgages
A major goal in life is owning a home; however, buying a home is a daunting task. The first major step in buying a home is applying for a mortgage loan. The institution that is lending you money will only allow you to borrow so much money. (i.e. Your pre-approval is locked in at a certain dollar amount). There is a way that you could increase your appraised value of the residence through something called a Green Mortgage.
What is a Green Mortgage
“They allow home purchases or refinances for up to 15 percent of the as-completed appraised value of the residence. This money is set aside and used for renewable energy (e.g. solar system) installations and/or home efficiency projects (e.g. insulation, energy-efficient appliances, heating and air-conditioning, smart thermostats, energy-efficient windows, etc.).” -Jason MacDuff, President - GreenPenny
There are more benefits to the usage of a Green Mortgage than just that. After you fix those old utilities with energy-efficient ones you will see a sharp decline in your utility bills and a sharp increase in the equity in your home.
Benefits of a Green Mortgage
Homeowners may be paying more for utilities than they should, due to poor insulation, inefficient lighting fixtures, air leaks, and outdated heating and cooling systems. By reducing these costs through energy efficiency upgrades, homeowners could save money and be more comfortable in their homes. And, they’ll reduce the carbon footprint of their home too! Most people don’t know about Green Mortgages, probably because most people are used to the traditional 15-year, 30-year mortgages. Every institution offers them so they are just second nature when it comes to buying a home. Most banks don't offer green mortgages.
We asked Jason MacDuff, President of greenpenny, “Why do you think more people don’t know about a green mortgage” he told us that…
“This is a great question! I think it’s because they’re more complicated than a typical mortgage, so few banks offer them. At GreenPenny, we hope to change that. These mortgages can be good for the borrower’s pocketbook by reducing their energy costs, providing more comfortable living environments and helping the environment by reducing residential carbon emissions allowing homeowners to do their part to prevent too much warming of the planet. Win, Win, Win!”
How this works…
According to the HUD (Department of Housing and Urban Development) website: If a buyer’s total monthly income is $5,000, then their maximum allowable monthly payment at 29% is $1,450. And the maximum mortgage that they can get is $207,300
HOWEVER, with an energy-efficient home: The maximum allowable monthly payment for the same person at 33% is $1,650. And the maximum mortgage that they can get is $235,900. That amount makes a huge difference in the kind of house that you can afford! At the same time, your monthly bills will be lower, so you can afford them.
A more in-depth look at Green Mortgages from Alliant Energy Power House
GreenPenny refinance in action
Lisa Geason-Bauer, the president of Evolution Marketing, recently refinanced her home through greenpenny Bank and their green mortgage program. With the refinancing, she was able to get money to make her home more energy-efficient (i.e. air sealing, additional insulation, solar PV system, battery storage, LED lights, energy star-rated fans, etc..) All these things are added to your mortgage so you are making monthly payments on all these projects that have been done. The addition to the mortgage will pay off itself with the cuts on your utility bills. This means you are getting free upgrades to your house because you are paying a little more in a mortgage but a cut in your utility bills.
Who is Qualified?
If you already qualify for a regular mortgage, then in most cases you already qualify for a Green Mortgage. The only stipulation for it to be added to your mortgage is the actual energy-efficient improvements must be cost-effective. This means the energy efficiency item you are trying to replace has to save you more money in its lifetime than what you paid for that energy-efficient item. So, if a new roof costs $5000, it needs to save over $5000 in energy costs over the course of its life.
Green Mortgage Impact Report
This report is to highlight and approximate a number of residents in Wisconsin, by municipality, that are eligible to refinance their residential home’s mortgage during this period of low interest rates. While millions have refinanced their home already, what has been referred to as a “refinance boom”, we find that 197,000 more in Wisconsin have not yet taken advantage.
Furthermore, this report also documents the impact to homeowners and local economies if those refinancing were to opt for a “Green Mortgage” instead of a conventional one. Green mortgages - offered by Fannie Mae, Freddie Mac, the VA & FHA – allow homebuyers and those refinancing to finance additional energy-efficiency improvements to the property. Doing so can allow homeowners to continue to reduce their monthly expenses – both in terms of mortgage payments and utility bills – while also cutting carbon emissions through increases in energy efficiency and additions of renewable energy.