As more people become aware of the importance of energy efficiency in their homes, the cost of making upgrades can often be a deterrent. However, with the availability of new financing options, homeowners can now make energy-efficient improvements without breaking the bank. Thanks to the Inflation Reduction Act of 2022 (IRA), qualified homeowners can tap into the $8.8 billion fund to help cover the costs of energy-efficiency upgrades.
One of the best places to start looking for financing options is in your own hometown. Many municipalities offer housing assistance programs that provide funding for repairs, improvements, and energy-efficient measures such as insulation, weatherization, window replacement, heating, cooling, and water efficiency. These programs may offer grants, low-interest loans, or payment assistance funds to help cover the cost of upgrades.
State Housing Finance Agencies (HFAs) are another great resource for homeowners looking for financing options. These agencies offer a variety of programs to help pay for energy improvements or the installation of renewable energy systems such as solar panels or heat pumps. Many HFAs partner with federal enterprises like Fannie Mae and Freddie Mac to offer energy-efficient mortgage programs.
Each state has its own unique programs and incentives for homeowners looking to make energy-efficient upgrades. For example, Alaska offers Energy-Efficient Interest Rate Reduction loans, Connecticut has the Smart-E Loan program, Idaho offers low-interest loans for renewable energy projects, and Maine provides financial incentives and discounted interest rates on loans for energy efficiency improvements.
In addition to state programs, many utility companies also offer rebates and incentives for energy-saving upgrades. Homeowners can often find discounts on appliances, installation services for HVAC equipment, water heaters, and heat pumps through their utility provider. By taking advantage of these programs, homeowners can make energy-efficient upgrades more affordable and reduce their energy bills in the long run.
Overall, there are a variety of financing options available to help homeowners make energy-efficient upgrades in their homes. By exploring programs at the local, state, and utility company level, homeowners can find the financial assistance they need to make their homes more energy-efficient and environmentally friendly. So don’t let the cost of upgrades deter you—there are plenty of options out there to help you make the transition to a more energy-efficient home. Some utilities offer free home energy assessments to help homeowners identify ways to improve energy efficiency. These assessments can help homeowners save money on their energy bills and reduce their carbon footprint. In some cases, the cost of the inspection is refunded if the homeowner chooses to implement the recommended energy-saving measures.
On-bill financing is another option for homeowners looking to finance energy upgrades. This program allows homeowners to repay the cost of energy improvements through their utility bill. The funding for these programs may come from a third-party finance entity and is administered by the utility company.
The Green Button Program is a national initiative that provides utility customers with an easy way to track their energy usage. By visiting their utility company’s website, homeowners can access tools like the Green Button program, retrofit loans, on-bill financing, and other financing incentives. Additionally, homeowners can use the Energy Star Rebate Finder to ensure they are taking advantage of all available rebates and incentives.
Property Assessed Clean Energy (PACE) loans are another financing option for homeowners looking to make energy-efficient improvements. PACE programs are available in 38 states and are funded through municipal bonds. These loans are attached to the property, rather than the homeowner, and are repaid through the property tax bill over a period of 20 years.
PACE financing is also available in Canada, with provinces like Alberta, British Columbia, and Ontario offering locally authorized programs. Canadians can take advantage of PACE financing to finance energy-efficient improvements in their homes.
Energy-efficient mortgages are another option for homeowners looking to finance energy upgrades. These mortgages have favorable qualifying rules that take into account projected savings in energy costs and maintenance. Programs like the Fannie Mae HomeStyle Energy program and the Freddie Mac GreenCHOICE Mortgage allow homeowners to finance up to 15% of the “as-completed value” of the property to cover the cost of energy improvements.
In order to finance energy improvements along with a home purchase or refinance, homeowners can follow a series of steps that include obtaining a home energy assessment, obtaining written estimates from contractors, and providing the necessary documentation to their mortgage lender. The lender will then set aside funds to pay the contractor directly at closing.
Conventional mortgage programs like Freddie Mac’s GreenCHOICE Mortgage and Fannie Mae’s HomeStyle Energy Mortgage are available for purchase and refinance transactions on one-to-four family homes. Borrowers can finance up to 15% of the as-completed value of the property to cover the cost of energy improvements.
FHA Energy-Efficient Mortgages are available for purchase and refinance transactions and have expanded mortgage qualifying rules to account for energy savings. Homeowners can finance energy improvements through an FHA loan, with the minimum down payment being 3.5% based on the as-completed value of the property.
Overall, there are various financing options available to homeowners looking to make energy-efficient improvements to their homes. By taking advantage of programs like on-bill financing, PACE loans, and energy-efficient mortgages, homeowners can save money on their energy bills and reduce their environmental impact. Energy-efficient mortgages are becoming increasingly popular as homeowners seek to reduce their carbon footprint and save money on utility bills. The example provided in this article illustrates how various loan programs, such as FHA, VA, and USDA Rural Housing, can help finance energy improvements when purchasing or refinancing a home.
The FHA loan program allows borrowers to add money to their loan to finance energy improvements, such as solar-powered heating and cooling systems, insulation, and weatherproofing. This can be a great option for homeowners looking to make their homes more energy-efficient while also financing their mortgage.
For military servicemembers, veterans, and surviving spouses, VA mortgages offer up to $6,000 for energy efficiency improvements. These improvements can include solar-powered systems, insulation, storm windows, and furnace upgrades. VA loans require no down payment and can cover most closing costs, making it a flexible option for those looking to make energy-efficient upgrades.
USDA Rural Housing, administered by the U.S. Department of Agriculture, offers grants and loan programs to help homeowners make repairs and cover the cost of energy-efficient improvements. Eligibility guidelines apply, but homeowners can explore opportunities using the USDA Property and Income Eligibility website. By dropping a pin on any location on the flash map, homeowners can see if they qualify for expanded loan qualifications based on potential utility cost savings.
Author Anna DeSimone’s book, “Live in a Home that Pays You Back,” provides a comprehensive guide to net zero and energy-efficient homes, including a resource directory of incentives for every U.S. state and Canadian Province. This updated article serves as a helpful resource for homeowners looking to finance energy-efficient improvements through various loan programs.
In conclusion, energy-efficient mortgages offer a great opportunity for homeowners to make their homes more sustainable while saving money on utility bills. By taking advantage of programs like FHA, VA, and USDA Rural Housing, homeowners can finance energy improvements and make their homes more environmentally friendly. Anna DeSimone’s book and this article provide valuable information for homeowners looking to live in a home that pays them back in more ways than one.
