Overview
Everyone can agree that saving money is a great thing. But what if you could save money and help the environment? When purchasing a home, looking for a “green home” could save you money and help keep our world beautiful and safe for us and future generations.
According to the U.S. Green Building Council, a green home is simply a home that uses less energy, water, and natural resources than a traditional home. Homes can be retrofitted to become greener, or they can be built to be LEED Certified, meaning they are given a “Leadership in Energy and Environmental Design” certification. Whether you are building a home from the ground up, or trying to make your existing home more energy efficient, you may be able to save money on your taxes and mortgage!
What is an Energy Efficient Mortgage?
Making your mortgage payment smaller is great, but what exactly is an Energy Efficient Mortgage? According to the Department of Housing and Development (HUD), an Energy Efficient Mortgage is a federally recognized mortgage program that can be applied to most mortgages.
How Can Energy Efficient Mortgages Help Buyers and Homeowners?
The Energy Efficient Mortgage program is a savings program that credits the homebuyer directly through their mortgage for buying and maintaining an energy efficient home. This program can help homebuyers and homeowners in several ways. Beyond saving money, you can also benefit from an easier time securing a home loan in many cases when getting an Energy Efficient Mortgage, and homes that are LEED certified or have energy efficient improvements can be sold later for a higher price.
Types of Energy Efficient Mortgages
There are three basic types of Energy Efficient Mortgage programs to help make payments for a green home more affordable.
Conventional EEM
The first, a traditional Energy Efficient Mortgage, should be discussed directly with your lender, and EnergyStar provides a map of participating lenders on their website.
FHA EEM
The second, a Federal Housing Authority (FHA) Energy Efficient Mortgage, is available through the government-run FHA according to Research Alliance. This type of mortgage has several features, including increasing the mortgage amount to cover energy-based builds or improvements.
VA EEM
The third type, a VA Energy Efficient Mortgage, is more limited in scope, as it is through the Veteran’s Administration, and is only available to qualifying military personnel, reservists, and veterans. This type of Energy Efficient Mortgage is also only available when purchasing an existing home.
Eligibility and Getting an Energy Efficient Mortgage
Although eligibility requirements for these loans vary based on the type of loan and state, as well as the type of house – new or existing – you want to build or purchase, there are many loan options.
The traditional Energy Efficient Mortgage is open to most, and has much less stringent guidelines than the other two types of Energy Efficient Mortgages, as outlined here by the Residential Energy Services Network.
The Federal Housing Authority Energy Efficient Mortgage is also open to many, and consists primarily of a loan to help homeowners improve their current homes or when refinancing, and does have an income guideline, as outlined here by the Federal Housing Authority.
Finally, active service members, veterans, and reservists should contact the VA for more information on eligibility and discuss this program with both the VA and their realtor.
Additional Resources
To learn more, you can visit one of the following websites:
- Energize Ohio: Energy efficient mortgages
- University of North Carolina: Owners of energy-efficient homes are less likely to default on mortgages
What are Green Tax Credits?
In addition to Energy Efficient Mortgages, there are also several green tax credits for homeowners. These can help to reduce your overall tax burden.
Federal Tax Credits
The Internal Revenue Service (IRS) has multiple options for environmental tax credits as part of The American Recovery and Reinvestment Act of 2009, including the Residential Energy Property Credit – which is for homeowners who make qualified energy efficient improvements to existing homes – and the Residential Energy Efficient Property Credit – which is primarily for energy supply changes and improvements.
State Tax Credits
On the state level, every state varies, but most have some sort of tax credit for energy efficient improvements. The U.S. Department of Energy maintains a searchable list of state-by-state tax credits and incentives for energy efficient homes and improvements. For example, according to Arkansas Energy, there are several loan opportunities through various power and energy companies as well as tax incentives, like the Wind Energy Manufacturing Tax Incentive mentioned by the American Wind Energy Association.
Tips
When looking for tax credits for energy efficient home buying or home improvements, a couple of tips can be helpful. First, check out the most recent guidelines on the IRS website, as those guidelines will be updated most frequently and accurately. Second, talk with your tax accountant or Certified Public Accountant (CPA) about your interest in energy efficient tax credits – they work with the confusing aspects of tax laws and credits every day, and can save you a lot of stress!
Finally, when buying a home, discuss tax credits and improvements with your realtor before buying your home, as they may have insight that can be invaluable or can point you in the right direction if they know going green is your goal!
Additional Resources
Don’t have a CPA? The American Institute of CPAs (AICPA) has a searchable list on their website.
You can also visit the Green Building Guide provided by the Ecosystem Science Center at Michigan Technological University.
Saving Money and Going Green as a Homeowner
If you have recently purchased or already own a home, there are also many great ways to save money with energy efficient upgrades, home energy audits, and using your local energy company as a resource. There are several large upgrades that can be done, but any homeowner can, when it comes time for new appliances, invest in and use a savings calculator such as the one found at the U.S. Energy Information Administration to find energy efficient appliances. These appliances can also in some cases be used for tax credits according to the Tax Incentives Assistance Project, resulting in savings for the life of the appliance and on your taxes! The Alliance to Save Energy (ASE) also has a list of ten simple tips you can use to make your home more efficient, including investing in low-flow faucets and showerheads, which are easy to find and install in your home.
Another great way to save money and make your home more energy efficient is to perform regular home energy audits. During the summer, keeping your cooling energy costs low can be challenging, but these tips from NRDC for spring and summer energy management can help keep the costs and usage down without leaving you sweating!
You may also be able to check with your local utility or energy company for tools they offer, such as energy audits or discounted or free energy saving tools like smart thermostats. For example, Memphis Light Gas and Water (MLGW), the utility company serving the Memphis, Tennessee metro area, offers free in-home energy audits like their Energy Doctor program, as well as rebates and guidance through their eScore program. Your local energy company may have these programs as well – a quick glance at their website or a call to customer service should yield answers!
Resources for Going Green and Energy Efficient
Saving money when buying or upgrading a home can be a great bonus in addition to having a green home, and it’s easier than you may think. Homeowners, or even renters, can request a free energy kit from MyEnergyKit, powered by Duke Energy. This kit includes information as well as simple tools to make your home more efficient. As a bonus, it’s a great tool for kids to learn about how important energy efficiency is!
Make sure to find a home inspector who is familiar with energy efficient improvements and upgrades – for example, the International Association of Certified Home Inspectors (InterNACHI) is a great resource with some helpful tips and lists. Keeping current with tips from Consumer Reports on being a green homeowner is a great way to keep up with changing laws, trends, and tricks, but it is also a fantastic way to review your next purchases and keep improving your home’s energy efficiency.
Being more energy efficient and having a green home can come with multiple benefits such as saving money, living a healthier life, and having a more efficient and modern home.