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Tops Ways To Finance Your Dream Of Energy Efficient Homeownership

Financing your energy efficient home

Consumers are no longer just seeking out eco-friendly products, they are now taking their sustainable preferences into account when buying a home.

According to the National Association of Realtors, 59 percent of residential consumers are “very or somewhat interested in sustainability.” In another study made by EON Energy, 89 percent of prospective buyers say they want now an eco-friendly home.

In fact, 8 in 10 of them said they would prefer the inclusion of solar panels over a garden. However, for those thinking of investing in a solar PV system, finance is a top concern. Eco-friendly homes can often be more expensive to purchase.

For instance, in the Dallas area, green homes are 4 percent more expensive. Whether you choose to build an eco-friendly home or buy one already on the market, there are several options for financing your move.

Research State-Specific Rebates And Credits For Energy Efficiency

Earlier this year, the government has extended the tax credits for residential energy efficiency to December 31, 2021. The accompanying tax credit incentive for builders of energy-efficient homes was also extended to the same deadline, in the event you are thinking of building a green home from the ground up.

However, individual states all have their own state tax rebates for energy-efficient homeowners as well. For instance, Montana has 27 policies and incentives, including The Residential Renewable Energy Tax Credit program.

Under the incentive, taxpayers can claim up to 26 percent of their solar water heating systems expenditure. To find out more about the programs in your state, visit the Database of State Incentives for Renewables & Efficiency (DSIRE) website.

Apply For An Energy Efficient Mortgage

There are now over 40 banks and lenders that are participating in the energy-efficient mortgage program. The initiative is available and can be applied to most new home purchases, remodels, and refinancing deals.

The same initiative can also be applied to most federal mortgage deals. If you are confused or worried about qualifying, mortgage brokers like The Home Loan Expert can do the legwork to find out what mortgage deals apply to you.

By recognizing the boost in value that energy efficiency features add to a home, lenders can grant larger mortgage values.

In some cases, your monthly mortgage payments may rise, but it is often offset by the reduction in household utility bills from eco-friendly home upgrades like wall and attic insulation and solar power.

If you are already speaking to a lender, be sure to ask them about adding an energy-efficient mortgage. Lenders can also couple the energy-efficient mortgage with other tools like capitalizing on the stretch ratio for Energy Efficient Homes (EEH).

If a home meets the minimum energy efficiency standards, the FHA permits lenders to stretch the qualifying ratio by 2 points, which will quickly help you to qualify for a larger mortgage amount.

Build Or Purchase A Smaller Home With Traditional Financing

While it is an unorthodox suggestion, smaller homes do have less impact on the environment and smaller energy bills. With less space, your heating and insulation requirements decline. Maintenance is also less as your energy costs are lower with less square footage.

Another great tip: you can capitalize on a traditional mortgage while still doing your bit for the environment. If you do feel passionate about adding or installing eco-friendly features to your home, you can also slowly do this in the coming years as your budget permits.

A good way to do this is to tackle it room by room or feature. For instance, switching your home electricity over to solar by investing in a small solar panel system. Another example is to insulate the walls of your hoke and the attic to keep to help the central heating system work less during the winter. This will automatically decrease your monthly bills by at least 30 percent.

Join Fannie Mae’s Single And Multiple Family MBS Program

Fannie Mae’s Single and Multiple Family MBS initiatives were launched as a part of the Green Business Support and operate by offering investors ‘green bonds’. For investors, they enjoy guaranteed timely payment of principal and interest.

For borrowers, the program gives access to mortgage loans that are backed by newly constructed homes that have received the approved green building certifications in the last 5 years. This is an attractive option for those looking to invest in eco-friendly property or that want to kick start their sustainable real estate portfolio.

Renovate A Traditional With Eco-Friendly Upgrades And Green Loans

Another option for those looking to invest in an eco-friendly home is to remodel a traditional home with the help of a green loan. Making simple key sustainable home upgrades like installing solar panels or installing suitable insulation can make a huge difference in the energy efficiency and environmentally friendly profile of your home.

Also, this option allows you to chart your path to a dream sustainable home at your own pace. Some green loans for a remodel come with interest rates varying between 4.49 percent and 35.99 percent (depending on your credit score). The current minimum credit score accepted is 580.

Homeowners can also utilize their home equity for remodels. Home equity loans are secured based on the equity you have built up in your home and can sometimes work out cheaper for the borrower.

According to The Federal Trade Commission, you can borrow up to 85 percent of your equity. Home Equity Lines of Credit can give you access to money to borrow as your sustainable renovations go along and are great if you are planning to make eco-friendly upgrades over time.

Of course, there is also the option of establishing a payment plan with your contractor for eco-friendly renovations. You would be expected to pay a deposit before work begins, and payment markets would be set at certain project milestones like demolition.


If you are worried that a green build is out of your financial reach, don’t despair. As the demand for eco-friendly homes continues to grow, so will your options for financing. With more programs targeting eco-friendly home buyers, your dream of sustainable homeowners is much more realizable than it ever was.

Article written by:

I am a writer and reporter for the clean energy sector, I cover climate change issues, new clean technologies, sustainability and green cars. Danny Ovy

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