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Home energy efficiency improvements range from very little in cost to quite a lot depending on the type of work needed.  Caulking windows and wrapping a water heater cost less than $50, while replacing the insulation in an attic or sealing a crawlspace may cost thousands.  Homeowners benefit either way due to high return on investment of these measures, but in some cases homeowners turn to financing programs to get the work done, helping to lower their monthly energy costs and improve the value of their home.

Is financing home energy improvements a good idea?  Absolutely! It’s both a good idea and very common. Around 70% of all home improvement projects up to $15,0000 are financed, and around 90% of projects over $15,000 are as well. The average American family has between $3,000 – $7,000 in disposable income available at any one point in time, and the average debt held by an American family is around $8,200. Since a small percentage of Americans are able to pay several thousands of dollars cash for important and high return on investment (ROI) improvements, financing is a great way to make these projects possible without incurring all of the up-front expense at once.  Two  common benefits to financing home energy improvements include:

  1. You don’t have to tie up your valuable disposable income and cash with large purchases.
  2. Low monthly payments and low interest rates make financing an attractive option.

Home buyers interested in improving the energy efficiency of a prospective home should consider an Energy Efficient Mortgage.  This type of mortgage includes capital to help pay for the needed energy efficiency improvements.  It works because those very improvements will lower the home’s operating costs and make the monthly bills easier to pay, resulting in your loan being more attractive to lenders due to the lower default risk.  Once improved, the home also carries a higher value in the market.

  • FHA’s Energy Efficient Mortgage program (EEM) helps homebuyers or homeowners save money on utility bills by enabling them to finance the cost of adding energy efficiency features to new or existing housing as part of their FHA insured home purchase or refinancing mortgage.
  • EEMs recognize that reduced utility expenses can permit a homeowner to pay a higher mortgage to cover the cost of the energy improvements on top of the approved mortgage.
  • FHA EEMs provide mortgage insurance for a person to purchase or refinance a principal residence and incorporate the cost of energy efficient improvements into the mortgage.
  • The borrower does not have to qualify for the additional money and does not make a down payment on it.
  • The mortgage loan is funded by a lending institution, such as a mortgage company, bank, or savings and loan association, and the mortgage is insured by HUD.
  • FHA insures loans. FHA does not provide loans.

Financing options can be a crucial piece of the energy efficiency upgrade puzzle. With that in mind, Fannie Mae recently modified its energy improvement mortgage loan program to encourage homeowners to make energy-saving upgrades to their homes. HomeStyle Energy provides opportunities to finance new energy improvements or pay off previous debt incurred to increase the efficiency of their homes. A key adjustment to the program is the addition of DOE’s Home Energy Score reports to the line-up of approved reports when one is needed. This addition offers homeowners a quick, reliable, affordable approach for estimating a home’s expected energy use. The Home Energy Score also provides recommendations for cost-effective energy improvements.

Need more information?  Here are a few resources describing various energy efficiency financing options:

Looking to finance energy efficiency or renewable energy improvements in your home?  These institutions provide financing options to NC residents:

  • FHA Loan Program: Click here to learn how the Energy Efficient Mortgage Loan program helps current or potential homeowners significantly lower their monthly utility bills. Energy efficient improvement costs can be incorporated into an FHA loan.
  • Kilowatt Financial: Kilowatt Financial makes clean energy accessible and affordable for more homeowners throughout the United States. By putting our credit expertise to work, we are able to provide flexible solar and energy efficiency financing through easy-to-understand options that fit most consumer budgets. With responsible corporate values and dedication to our customers, business partners and lenders, Kilowatt is rapidly becoming a leading clean energy-focused consumer finance company in the US.
  • Renew Financial: Renew Financial is pioneering new innovations in financing that are helping efficiency and renewable energy contractors grow their business while promoting energy independence. We can’t make big changes by thinking small. Join our team and be part of the efficiency solution.
    • Homeowners: Efficiency improvements and renewable energy projects pay over the long run in comfort and utility savings. So why should you have to pay for them upfront?  Renew Financial has pioneered efficiency financing to allow homeowners to borrow 100% of project costs and pay over the course of up to 25 years. In many cases, your monthly savings will be greater than your monthly repayment amount.
    • Contractors: We have several low-cost financing options for you to offer your customers. Together, they provide coverage for the majority of homeowners you serve.
  • Mosaic:  Mosaic is the first peer-to-peer lending platform for solar power. We provide borrowers access to affordable solar loans, investors opportunities to invest in renewable power, and clean energy supporters the power to spread wealth from the sun to their communities. Mosaic is enabling thousands of people to profit from the ongoing transition to a better energy future.  Mosaic has been honored by Fast Company as a top ten most innovative company in energy for two consecutive years, by the Department of Energy as a SunShot Grant recipient, The Sierra Club as the Trailblazer Company of the Year, and Verizon Wireless as the environmental winner for their Powerful Answers Award.
  • Renovate America:  Renovate America is leading the way in making homes and communities more energy and water-efficient. We partner with cities and counties to provide innovative new financing solutions that help save energy, lower utility bills, reduce emissions, create new jobs and increase property values. We created the HERO Program, which has become the fastest growing energy efficiency financing solution in the country. With over $1.5 billion in funded projects in the program’s first 4 years, HERO is setting records nationwide.
  • GreenSky:  We provide a wide range of credit products to meet the needs of customers in multiple markets.  Our plans and products can be used to finance Home Improvement projects, including: remodeling, roofing, HVAC, siding, solar panel installs, electrical, decks, patios, and more.  We make it easy for businesses of all sizes to offer credit to their customers anywhere and everywhere.  With great credit plans, high approval rates and fast funding, the GreenSky® program is dedicated to helping you grow your business.
  • HERO ProgramHERO is the fastest-growing residential energy efficiency financing solution in the country.  The HERO Program offers financing for up to 20 years with low fixed interest rates for home energy products permanently affixed to the property.  Choose from more than 900,000 energy-saving products.