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Quick Takeaways:
- Energy-efficient mortgages are available through conventional mortgage loans, FHA-insured loans, and VA loans.
- Utilizing an energy-efficient mortgages can “finance efficiency improvements, save on utility bills and even increase how much home you can afford.”
- NAR supports any initiatives and incentives to save energy and minimize the environmental impact of homeownership.
Climate change is here to stay, but energy-efficient mortgages (EEM) and other environmental improvement programs for homeowners can help offset the cost of green home improvements. Learn about NAR’s advocacy for sustainability; obtain more information about the qualifications for energy-efficient mortgages; and take a look into the FHA, VA, and conventional loan markets for EEMs.
Please note: EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.
Information From NAR
REALTORS® and Sustainability Research Report (National Association of REALTORS®, March 2024)
“In March 2024, NAR surveyed its members pertaining to sustainability issues facing the industry. The findings are as follows: 39% of respondents reported their MLS has green data fields, and respondents typically used the green data fields to promote green features and energy information; 57% said energy efficiency promotion in listings was very or somewhat valuable; 45% of respondents found clients were at least somewhat interested in sustainability; 41% of homes with green certifications spent neither more or less time on market.”
Energy Efficiency and Climate Change (National Association of REALTORS®)
“To help advance an economically prosperous and environmentally sustainable future, NAR supports all forms of energy generation, including voluntary, performance-based incentives to save energy, while minimizing their environmental impacts. NAR also supports educating real estate professionals, real estate owners, developers, managers, tenants, occupants, lenders and investors regarding the benefits of voluntary, market-based energy conservation practices.” Learn more about NAR’s advocacy efforts related to energy efficiency.
Green Mortgages
Earning the New Energy-Efficient Home Tax Credit (U.S. Green Building Council, June 28, 2024)
“The Inflation Reduction Act (IRA) of 2022 enhances and creates new tax incentives for buildings and energy efficiency programs with the goal of reducing carbon emissions and creating jobs and other economic activity in the United States. For homebuilders, the new and improved Internal Revenue Code Section 45L New Energy Efficient Home tax credit (45L) under the IRA creates significant new incentives for new or substantially reconstructed energy-efficient homes. The IRA amended and extended 45L to increase the tax credit to up to $2,500 per unit for homes that meet Energy Star certification and up to $5,000 for homes achieving the Department of Energy’s Zero Energy Ready Home certification. The incentive is in effect for 10 years, applying to homes that are acquired—sold or leased—from 2023 through 2032. Multifamily projects only (not single-family or manufactured houses) must meet federal prevailing wage requirements to be eligible for the full $2,500 Energy Star credit per unit and $5,000 ZERH credit per unit.”
Want a More Energy-Efficient Home? A Green Mortgage Can Help You Pay for It (CNET, March 18, 2024)
“A green mortgage is a loan for homeowners who want to live in a property that doesn’t require a massive drain on Earth’s resources. While governments and corporations debate how to meet the needs of the planet, you can play your part as a homeowner by upgrading your older home or buying a new one that focuses on energy efficiency. EEMs are best suited for buyers looking to invest in cost-effective technologies or to save on utility bills over the long term. Though it can often require a bigger investment, an eco-friendly property can have worthwhile benefits.”
The Mortgage That Will Pay to Make Your Home More Climate Friendly (CNBC, April 8, 2023)
“The residential real estate market has been volatile due to rising interest rates, but the peak spring season—if challenging for buyers and sellers—is here. For many potential homebuyers, a green mortgage could be a good idea, especially as incentives for energy-efficiency upgrades increase and costs of new climate technology are coming down. A green mortgage—also known as an energy-efficient mortgage—is different than a conventional mortgage in that it allows borrowers to finance certain green improvements at the same rate and terms as their home purchase. For many homebuyers this could mean making environmentally-friendly upgrades sooner than they might otherwise be able to afford, while also reducing their monthly energy costs.”
Buying an Energy-Efficient Home is a Financially Bright Idea (USA Today, May 1, 2019)
This article looks at energy efficient or “green” homeownership more broadly. It includes the benefits of an energy-efficient home, the differences in conventional and energy efficient homes, how to find an energy efficient home, and a discussion of energy efficient mortgages to update a conventional home to become more environmentally friendly.
Energy Efficient Mortgages (Energy Star)
A discussion of the three types of Energy Efficient Mortgages: conventional, FHA, and VA. Conventional EEMs are obtained through Fannie Mae, Freddie Mac does not have an EEM program. FHA EEMs “enable homeowners to finance energy efficient improvements with their FHA-insured mortgages.” VA EEM loans are available to “qualified military personnel, reservists, and veterans for energy improvements when purchasing an existing home.”
Resources, Studies, Websites
GreenCHOICE Mortgages (Freddie Mac)
“Freddie Mac believes that reducing home utility costs places families in a better financial situation and helps preserve home affordability over time. Through our GreenCHOICE Mortgage® offering, we are committed to facilitate the financing of energy efficient home improvements and energy efficient homes, helping more families attain and maintain home affordability. Finance energy efficient improvements with any mortgage product, property type and financing terms up to 30 years to provide greater affordability for borrowers, offer more flexibility and combine the flexibilities of Home Possible Mortgages to offer borrowers additional affordable financing opportunities.”
How to Get a VA Energy Efficient Mortgage (EEM) (Veterans United, Nov. 17, 2022)
“Investing in upgrades and technologies that boost energy efficiency can save homeowners a healthy chunk of change in the long run. As with other lending options, VA borrowers can look to obtain an Energy Efficient Mortgage (EEM), which allows qualified buyers to add to their purchase or VA Streamline (IRRL) refinance loan the cost of acceptable energy improvements.”
Energy Efficient Mortgage Program (United States Department of Housing and Urban Development)
“In 1992, the Department of Housing and Urban Development initiated the Energy Efficient Mortgage as pilot demonstration in five states. In 1995, the pilot was expanded as a national program… Under its EEM program, FHA Insures a borrower’s mortgage used to purchase or refinance a principal residence, and the cost of energy efficient improvements to be made to the home. The borrower need only qualify for the loan amount used to purchase or refinance a home. The borrower is not required to be qualified on the total loan amount with the portion of loan used to finance energy efficient improvements… After the mortgage closes, FHA insures the loan to protect the lender against loss in the event of payment default.”
Green Financing Loans (Fannie Mae)
“Fannie Mae has a suite of Green Mortgage Loan products that benefit borrowers who invest in energy and water efficiencies, including preferential pricing and additional loan proceeds for energy and water efficiency retrofits.” These tools include the “Go Green Flowchart,” “Green and Healthy Housing Financing Options and Incentives,” and case studies about borrowers who use Green Financing Loans.
eBooks & Other Resources
Books, Videos, Research Reports & More
As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.
Residential Green Valuation Tools (Appraisal Institute, 2014) HD 1387 A36
Energy-efficient Mortgages and Home Energy Rating Systems: a Report on the Nation’s Progress (National Renewable Energy Laboratory, 1993) QC 73.8 N21ee
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