The Rise Of The Energy-Efficient Mortgage

More home buyers and current home owners are weighing the merits of a "green" mortgage, according to U.S. News & World Report. Energy-efficient mortgages allow home owners to finance "green" home improvements, such as solar panels, geothermal heating, tank-less water heaters, and newer, more energy-efficient heaters or air-conditioning systems.

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Fannie Mae, the Federal Housing Administration, and the Veterans Administration offer loan programs that include energy-efficient mortgages. On FHA loans, the cost of improvements usually can't exceed 5 percent of the property’s value, but is capped at $8,000. With VA loans, veterans can usually add up to $6,000 in energy-efficiency improvements, according to U.S. News & World Report. On conventional loans, funding for energy improvements often is capped at 10 percent of the appraised value of the completed property.

Lending experts warn that borrowers need to be careful in making sure they're comfortable with the higher monthly mortgage payments that often result from taking out these loans. But over the long-term, the decrease in the home's energy costs may make up the difference. Indeed, many lenders won’t even process an energy-efficient mortgage unless it will result in a net cost savings.

The average home owner spends about $2,200 annually on energy bills, according to the Department of Energy’s Energy Star Program. The Environmental Protection Agency says that adding insulation and improving the sealing of a home has the potential to curb total energy costs by 10 percent. According to Energy Star, programmable thermostats can save home owners $180 annually; replacing single-pane windows can offer a $500 annual savings; solar water heaters offer a $140 savings; and energy-efficient HVAC systems can offer $200 or more in savings.