What Do You Know About Refinancing with an Energy Efficient Mortgage?Your vintage drafty windows are doing more than just making you out on a sweater and wear extra socks. They’re costing you money, every month in utilities. You know you need new ones. Not to mention insulation in the attic and a new hot water heater. But how do you find the money to make those upgrades? If you’re ready to refinance, you can use an Energy Efficient Mortgage (EEM).
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Find an Energy Efficient Mortgage Lender
Depending on your needs, different kinds of mortgages are available to you.
- Conventional Loans: These are usually capped at 10 percent of your appraisal value.
- Federal Housing Authority (FHA): These can’t more more than 5 percent of your property value. You’ll need to find a Federal Housing Authority (FHA) approved lender to go this route.
- Veterans Administration: An excellent loan option for qualified veterans (and possibly their spouses), these mortgages are usually capped at $6,000.
Get a Home Energy Rating System (HERS) Report
Find a Home Energy Rating System provider or an energy consultant to examine your house and recommend cost-efficient improvements. They’ll also be able to give you a Home Energy Rating System (HERS) Report. That’ll help you decide which improvements to make, and show your lender that your estimated savings are going to be more than the estimated cost. Don’t worry if it seems like a big upfront cost. You can include this fee in the cost of your mortgage.
Plan your upgrades
Use your HERS report to figure out exactly what you need most. If you had your heart set on new windows, but the report shows they’re going to cost more money than they’ll save, your lender probably won’t approve that upgrade. Look for improvements that are going to give you the biggest return on your investment.
Give your lender your HERS report and any other information they need to approve you. Make sure you have all your ducks in a row. Know what liens you have on your home (including a HELOC), know your credit score, and keep an eye on your debt to income ratio.
Get bids and hire contractors
If you can prove that you have the skills to DIY your improvements, your lender can authorize you to do the job. Just remember, the work has to be done 90 days after closing.
Watch your utility bills drop
Not to mention you won't have to buy as many sweaters and socks.
Another bonus is that you may save even more money when it's time to pay taxes. Have you made energy saving improvements to your home?