Print this page

What you should know about Energy Efficiency Loans

Written by Posted On Friday, 30 November 2018 04:57

As a property owner, you have several options available for you to enhance energy efficiency for your home. One of the most common options is taking an energy efficient mortgage. This is a loan that is backed by your mortgage company. Therefore, your home acts as the collateral. On the other hand, you may pick an unsecured energy efficiency loan. This financing does not use your home as collateral. Since this funding is riskier to the lender, you are likely to get low amounts and high interest. Most of the time, such lending will be guaranteed by other assets or guarantors.

The Federal Housing Administration (FHA) also offers energy efficient loans to potential and current homeowners to help them install energy efficient systems in the existing properties or the homes they intend to purchase. This product is available to those who have taken FHA mortgages or who are eligible to take such loans. Those who intend to take a mortgage can incorporate the cost of making improvements into the total mortgage cost. Those with active mortgages can refine their mortgage to cover the costs of energy improvements.

The FHA is an umbrella body that guarantees mortgages from default. This helps lenders offer mortgages to the low-income bracket without a high perceived risk of default. Loans are provided under section 203(b) fixed-rate mortgage and 203(k) home rehabilitation program. The amount that you can get from the program is a maximum of 5 percent of the home value.

Qualifying for the Energy Efficiency Financing Program

Different programs have varying qualifications to access financing. However, there are some common eligibility requirements that you need to meet.

Energy Rating

A home energy rating is an energy audit result of your home. The audit is done by a professional rater who is certified by one of the few home energy rating organisations in the market today. Homes are rated from 0 to 150 with a lower score indicating that the home is energy efficient. The rater will provide a report showing the annual energy use and possible improvements that could enhance the home’s energy rating.

For you to get an energy efficiency loan, you must show that the house will become energy efficient once the projected improvements are made to the house.

Ability to Repay

Your ability to pay the money back is a factor when not only determining whether to lend you the funds but also the rates of interest that will be offered on loan. Most programs finance the entire energy efficiency budget, but the lender must be convinced that you can pay the loan. The presence of another debt such as student loan may lower the chances of getting funded.

An energy efficient loan is an excellent home improvement funding option that you should consider taking if your home is not energy efficient. The improvement project not only raises the value of your home, but it also helps lower your monthly energy bills. Over time, the energy savings may cover the cost of making your home energy efficient.

Rate this item
(0 votes)
Marinus Nutma

Latest from Marinus Nutma

Joomla! Debug Console

Session

Profile Information

Memory Usage

Database Queries