Energy-efficient mortgages (EEMs) have existed since the seventies, but the recent boost in environmental awareness, along with rising energy costs, have convinced many to jump on the bandwagon and "go green". EEMs do more than benefit the earth. They offer incentives to home owners that ordinary mortgages simply cannot compete with.

Energy efficient mortgages encourage pollution reduction and energy conservation. Also, owners of energy-efficient homes will save a great deal on their utility bills over time. The assumed savings allow a new debt-to-income ratio, meaning that individuals may qualify for more expensive homes.

A house can either be built or improved to meet energy-efficient standards. Sometimes improvements can even be financed as part of the loan! Several FHA approved lenders offer EEMs, including Fannie Mae and Indigo Financial Group. Such institutions are more than willing to help others qualify for EEMs.

The process begins with a HERS (Home Energy Rating System) report. First, a house is inspected by a qualified energy rater. From the insulation to the windows, everything is graded using a ratings system of 1-100. The present cost of energy is then compared to an estimate of post-upgrade savings.

Possible upgrades range from highly efficient boilers to solar panels. A home's windows, water heater, and even air conditioning system may also be improved. Anything that will save more than it will cost initially is acceptable. It's up to the energy rater to report exactly what those possibilities are.

The price of a HERS report may reach up to $300, but this expense can usually be financed with the house or paid by the seller. No matter who ends up covering it, it's a worthwhile investment considering the potential savings.

Some people shy away from energy-efficient mortgages because of the extra paperwork involved. In addition, an energy rater may not be available to visit a house for a few days, lengthening the home buying process. For those with time and patience to spare, who want to save in the long run, EEMs are ideal. The differences between EEMs and orthodox mortgages will vary depending on the lender.

Some financial institutions will cut interest rates or eliminate upfront fees. Others will make a donation to charity in honor of the home owner or lower closing costs. Tax cuts have even been offered to those with energy efficient mortgages. It's best to simply visit various lenders and learn which one has the most to offer.

Learn more about this author, Shannon Beineke.
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