Energy Efficient Mortgages: Green Loans That Don’t Bankrupt the Earth

Energy-efficient mortgages (EEMs) are a well-kept secret, even though they’ve been around for 20 years. These mortgages promote the design and construction of efficient new homes, as well as the green renovation of existing homes.

“EEMs probably wouldn’t hit the radar, they’re so underutilized,” says Claudia Brovick, public affairs director of the Residential Energy Services Network.

To raise awareness, former Vice President Al Gore promoted carbon-neutral mortgages in a speech last fall. He called for the creation of “Connie Mae” to provide such loans and “remove the purchase price barrier for such improvements,” including more efficient heating and cooling, thicker insulation and windows with insulating coatings.

Nearly any lender can offer an EEM, but most don’t. “We’re trying to generate consumer demand so mortgage companies will respond and EEMs will be more common,” Brovick says, emphasizing that these mortgages take no additional time to process.

Here’s how they work: Using an independent energy rating and recommendations from a certified rater, mortgage brokers and underwriters calculate how much homeowners will save by using green building practices, energy-efficient appliances and the like. Those savings get added to an applicant’s income, which improves the debt-to-income ratio. “A more affordable home means you can afford more home,” says Joel Wiese, a mortgage broker with Indigo Financial Group in Michigan, which specializes in EEMs.

Yes, you may borrow more money, but the energy savings more than offset the higher monthly payment. You can use these loans to finance new construction, remodels and upgrades for resale homes, or to refinance your current home.

Another lender, Greenlight Financial Services offers a Green Loan Discount to consumers who purchase, build or practice principles that conform to health and sustainability standards. Those who qualify after completing a questionnaire at receive a full fee dismissal, a savings of $295. Many EEM providers also offer additional aid for low-income families.