If you're planning to refinance your mortgage, consider borrowing more than the amount needed to pay off your existing mortgage, and use the extra money to make energy-efficiency home improvements. Here's why:

• Interest paid on your home mortgage or equity loan is usually tax deductible
• Energy-efficient home improvements will immediately lower your monthly energy bills.

Energy Efficient Mortgages

Just like the real costs of owning a car includes operating expenses, the same is true for a home. Rising utility costs must be factored into the costs of owning a home. An energy efficient mortgage means comfort and savings.

When you are buying, selling, refinancing, or remodeling your home, you can increase your comfort and save money by using an Energy Efficient Mortgage (EEM) – one can be applied to most home mortgages. And provide the borrower with special benefits when purchasing an energy-efficient home or a home that can be made efficient through the installation of energy-saving improvements.

Home owners with lower utility bills have more money in their pocket each month, thus they can afford to allocate a larger portion of their income to housing expenses.

Financing energy improvements through an EEM provides the following benefits:

• Cost-effective energy-saving measures may be financed as part of the mortgage.
• Make an older, less efficient home more comfortable and affordable. Increase your buying power.
• Stretch debt-to-income qualifying ratios on loans for energy-efficient homes.
• Qualify for a larger loan amount. Buy a better, more energy-efficient home.

Home Energy Rating: Key to Getting an Energy-Efficient Mortgage

One of the keys to getting an energy-efficient mortgage is having a certified home energy rater conduct an energy audit of your home before your financing is approved. This verifies for the lender that the home is efficient, or notes areas that need improvement to save money on monthly energy bills. The cost of these improvements then can be added to the mortgage.

Additional Information

Alliance to Save Energy spokespersons often appear on The Money Pit Home Improvement Radio Syndicated Show. An April 2004 show covered the home energy rating system, what a home energy rater does, and how to find raters in your state.

For more detailed information regarding Energy Efficient Mortgages including case studies, examples, and tips, visit the Federal Citizen’s Information Center’s Energy Efficient Mortgage Home Owner’s Guide.

Financing Possibilities – Government Insured

U.S. Department of Housing and Urban Development

Under the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Authority (FHA) insures mortgage and home improvement loans, through its approved lenders, for borrowers who would not otherwise qualify for conventional loans on affordable terms, such as some first-time home buyers and some residents of disadvantaged neighborhoods.

Applications must be submitted to the local HUD Field Office through an FHA-approved lending institution. HUD's homepage offers a searchable list of approved lenders.

Additional information available from the U.S. Department of Housing and Urban Development, Office of Insured Single Family Housing:
451 7th Street, S.W.
Washington, DC 20410
(800) 569-4287 – This telephone number will connect you to a directory service maintaining contact information to a mortgage counselor nearest you. To seek application to an Energy Efficient Mortgage, here is a great start to finding out how you can apply.
http://www.hud.gov

U.S. Department of Veterans Affairs

The U.S. Department of Veterans Affairs (VA) guarantees mortgage loans for veterans with active duty service and qualified reservists. Its EEM can be used to purchase or refinance a home along with the cost of making energy-efficient improvements. To cover the cost of the improvements, the loan amount can be increased:

• Up to $3,000 based solely on documented costs;
• Up to $6,000 if the increase in the mortgage payment is offset by the expected reduction in utility costs;
• More than $6,000 based on a value determination by VA.

A VA refinancing loan may not exceed 90 percent of the home's appraised value plus the costs of the improvements.

Interested customers should go through the normal home loan application procedure, inquiring the lender about an EEM at the beginning of the process.

Additional information available from
U.S. Department of Veteran's Affairs
810 Vermont Avenue, N.W.
Washington, DC 20420
1-800-827-1000
http://www.homeloans.va.gov/rlcweb.htm - This webpage lists the regional offices for the U.S. Department of Veteran’s Affairs, ideal for applying for a home loan.

Financing Possibilities – Conventional

Fannie Mae

• At the current time Fannie Mae’s Energy Efficient Mortgage program is under review and not accepting applicants. Interested customers are advised to contact Fannie Mae periodically for updates.
• Additional Information Available from:
  Fannie Mae Resource Center
  Telephone 1-800-7FANNIE (1-800-732-6643)
  www.fanniemae.com

Freddie Mac

• Freddie Mac is a stockholder-owned, congressionally chartered corporation that works to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. It purchases mortgages from lenders and packages them into securities that are sold to investors, providing homeowners and renters with lower housing costs and better access to home financing.
• Freddie Mac provides incentives and criteria, as well as flexible guidelines, for EEMs that it's willing to buy, which encourage lenders to offer them. However, the EEMs are limited to purchasing existing energy-efficient homes or those to be retrofitted or renovated for energy efficiency.
  • Several home energy rating methods and/or documentation, not just a HERS report, are acceptable.
  • Lenders can exceed the standard 2 percent debt-to-income stretch at their own discretion.
  • It allows a broader range of energy-efficient improvements than most EEM programs.
• Additional Information Available from
  Freddie Mac Investor Inquiry
  1551 Park Run Drive, MS D5O
  McLean, VA 22102
  800-373-3343
  Email: investor_inquiry@freddiemac.com

U.S. Energy Efficiency Improvements

• Many utilities in the United States offer a range of energy-efficient services to their customers. The Edison Electric Institute (EEI), an Alliance Associate, offers a list of member company programs that offer efficiency services to homeowners, companies, and industrial plants.
• Homeowners will find more energy-efficiency services from utilities on the National Energy Affordability and Accessibility Project (NEAAP) website.