Financial Tools: EEMs and More
A variety of financial tools are available to make efficiency and solar more accessible. Viridiant staff are here to help you identify your best solution, provide the technical resources needed, and offer referrals to lenders and contractors.
Energy Efficient Mortgage (EEM) or Energy Improvement Mortgage (EIM)
These are lending packages for a new or existing home that provides additional borrowing power to finance home improvements that will reduce energy costs by an amount greater than the addition to the mortgage payment. HUD launched this concept in 1992 and describes it like this: “The EEM program recognizes that an energy-efficient home will have lower operating costs, making it more affordable for the homeowners. Cost-effective energy improvements can lower utility bills and make more income available for the mortgage payment.”
Here’s an example: you find an older home in the Richmond metro area you’d like to purchase. We visit the home and note that there’s a new heat pump, but the duct system needs a lot of sealing and insulating and the attic and basement would benefit from some insulation improvements. Our sophisticated “energy modeling” calculates that these improvements should reduce heating/cooling costs by an average $45 per month. Bids for the work come in at $8,000, which would add about $39/month to your mortgage payment. Because this shows a net monthly savings, it would qualify for an EEM – and your borrowing power would be increased in order to have the improvements completed before move-in.
You also can use an EEM for solar installations and for newly constructed homes. Contact us early in your home-buying/building process so that we can offer the most cost-effective solutions. If your upgraded home achieves a certain energy performance threshold, you may be able to increase your debt to income qualifying ration by up to two percentage points.
Another tool for financing home energy improvements is the typical renovation loan. Viridiant can help you devise the best package of energy improvements to pursue via a FHA 203K or a FannieMae HomeStyle Renovation Mortgage.
Your EarthCraft, ENERGY STAR, or LEED certified home will qualify for an EEM, as will a HUD Energy Efficient Home (EEH). Viridiant can provide all of the documentation for your lender.
To sell your home more quickly and for more money, be sure to capture the increased value of your efficient or solar-powered home in the appraisal process. The Appraisal Institute’s Residential Green and Energy Efficient Addendum (PDF) provides official documentation of features such as third party certifications, solar, high-performance appliances, insulation, windows, HVAC, and more. Viridiant staff can connect you with an accredited green appraiser to identify qualifying features and document the added value.