Is an Energy Efficient Mortgage a Real Thing?

When shopping for a mortgage, it may be a good idea to consider an energy efficient mortgage (EEM). An energy-efficient home can reduce living expenses in addition to conserving and protecting natural resources. An EEM can increase the amount you are able to borrow, provided you are spending the extra money on cost-effective renovations that are environmentally friendly. The upgrades are investments that pay for themselves over time by cutting the cost of utility bills. 

What is an Energy Efficient Mortgage?

The necessity and impact of energy efficient utilities have been on the rise in the last few years. Homeowners continue to see value in upgrading or investing in green products. Lenders 

An EEM is available as a conventional, Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA) format. 

Qualifying upgrades include solar panels, double paned windows, ducts and insulation,  cooling and heating systems, other weatherizing features and many other repairs and improvements.  Not only is a green home cost-effective but the environment feels the benefits too, both short and long-term. 

Borrowers may use the EEM program to finance the cost of energy efficient improvements into their new mortgages, without the need to qualify for additional financing, because cost effective energy improvements result in lower utility bills making more funds available for their mortgage payments.  Energy Star

Does it Differ from Conventional Mortgage?

Like a conventional loan, there are certain requirements that must be met by the borrower. To be approved, the borrower will need to qualify for the minimum credit, provide any necessary documentation, and ensure that all improvements planned are actually cost-effective. Any of these upgrades must be less than the reduction in total costs in energy savings over a lifetime.

What qualifies as a “cost-effective improvement”? When you apply for an EMM, an certified energy consultant will provide you with a home energy rating report. The report will estimate the potential energy you can save using a Home Energy Rating System (HERS).

Through a FHA Energy Efficient Mortgage, you can get coverage as a first-time buyer or homeowner towards new or existing homes. Some of the best benefits include: Loan limits may be exceeded, there is no re-qualifying, no additional down payment needed, improvements are made after closing (for buyers). EEM’s can also be used when refinancing current mortgages or remodeling. You can get the same benefits without having to move, make home improvements that will save you month, and can increase the value of your home for potential resale in the future.

How Does an EEM Work?

EEM’s are to be used alongside your conventional or renovation loan. It is different in all areas, but you can borrow from eight to 15 percent of the home’s appraised value.  

For buyers, consider an EEM if you are looking to purchase an older property. Certain HVAC systems, windows, furnaces, and other structural elements can be updated with energy-saving enhancements. Use the EEM program to finance these improvements. That way, you can save more on bills and have more funds available towards your monthly mortgage payments. 

For sellers, an eco-friendly home is on many homebuyers wish lists today. Using an EEM for any repairs, upgrades, or improvements can help increase the value of your home and make it more appealing. It will actually make your home more affordable to more buyers; they know that they will be saving on monthly costs.  

Today, many homes are constructed with built-in energy efficient features. In that case, homebuyers can use the EEM as leverage to make the purchase. This will give you wider buying power while lessening your carbon footprint.  

An Energy-Efficient-Mortgage may be a great investment for you. Like any loan, there are certain restrictions so be sure to talk to a trusted mortgage professional to find out if a green mortgage is right for you.

*This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc., with information from resources like USNews,, EnergyStar.