Are you buying a home or ready to refinance and you want to be “Green” about it?  How can a Mortgage Loan be “green”?  When dealing with a mortgage, the most common “green” items most people are interested in is the green backs in their pockets.  A Green mortgage is a mortgage that rewards a home owner for being Green.  The (EEM) Energy Efficient Mortgage does this for homeowners.  The EEM allow homeowners to finance 100% the costs of Energy Efficient upgrades in their mortgage.  Here is an example of how an energy efficient mortgage can save you money.

Family is buying a $150,000 home using a FHA mortgage with a 3.5% down payment.  The home is not too energy efficient currently.  The buyers want to make the home more energy efficient, but does not have the extra cash to pay for the upgrades needed. A H.E.R.S (Home Energy Rating System) inspector determines that by adding a solar hot water system to the home the family will lower their utility bill by $40.00 a month.  The cost of a solar hot water system is approximately $5000.00 

Since the buyers do not have an additional $5000 to purchase the solar hot water they take advantage of a FHA EEM (Energy Efficient Mortgage)  The EEM will finance the $5000.00 into their mortgage when they purchase the home.  At closing, the buyers get the keys to their home and the $5000 is held by the escrow company.  The solar hot water installer installs the solar hot water system within 30 days of closing and then the escrow company pays the solar hot water installer.  Seems like a great deal??  It is, but it actually gets much much better.

In Tucson, Arizona customers of TEP would receive the TEP Incentive of $1500 for the installation of this hot water system within 30 days of installation .  Now this $5000 system is only costing $3500.  Sounds good, but it gets better!!!  Most installers who are approved by TEP will have the TEP Incentive assigned to the homeowners, so the actual initial cost of the $5000 solar hot water system  is only $3500.  If the buyer and solar hot water installer agrees on this the EEM will only have to finance $3500 on top of the mortgage saving the home buyer from paying interest on $1500. Sounds Great, but it even gets better!!

There is a 30% Federal Tax Credit of the cost of the solar hot water system after the TEP incentive.  That is an additional $1050 and plus a 25% Arizona State Tax Credit up to $1000 which is $850!!!   Making the actual cost of a $5000 solar hot water system $1575. 

Here are the details of the financing for the EEM (Energy Efficient Mortgage).

                                                             Purchase without a EEM (Energy Efficient Mortgage)                      EEM(Energy Efficient Mortgage) and Energy Efficient Upgrades

Purchase Price                                                                      $150,000                                                                                         $150,000

Down Payments 3.5%                                                             $5,250                                                                                            $5,250

Cost of Energy Efficient Upgrade                                                $0.00                                                                                             $3500

Base Loan Amount                                                                 $144,750                                                                                          $148,250

Loan with FHA upfront mortgage insurance (1.75%)                     $147,283                                                                                          $150,844

Monthly payment for principal, interest and mortgage insurance     $856.55                                                                                            $874.25

Added monthly payment                                                                                                                                                                $17.70

Monthly Utility Bills                                                                  $186.00                                                                                           $97

Saving from Energy Efficient Upgrades form utilities                           ZERO                                                                                           $89.00

Total Savings from having a EEM                                                   ZERO                                                                                            $71.30

By adding a $5000 solar hot water heater to a home using the FHA EEM mortgage, the homeowner can actually save over $70 a month and receive tax credit of about $1900 the next time they file their taxes!!!  The FHA EEM can be used for a purchase or refinance of a home.  There is no better option for FHA buyers and  homeowners today who want to be green who cannot pay cash for this.  There are other options for VA and larger FHA projects, but to make a home Energy Efficient there is no better option today.  I have a solar hot water heater in this example, but there or many different options buyers and homeowners have.  Some of the most efficient options adding new double and triple pane windows, weather stripping the home, and new high R value installations.  New high efficiency heaters and air conditioners can also be included as well as most energy efficient upgrades.