Building Green

An Energy Efficient Mortgage Creates Home Value

by Ken Riead

What is an Energy Efficient Mortgage and should I be interested in one?

Given the current state of the national economy, many people are wondering what to do to help reverse the decline in their home’s value. One proven option is to increase a home’s energy efficiency through an Energy Efficient Mortgage. To quote RESNET; “… Another study published in the Appraisal Journal documented that the market value of a home increases $20 for every $1 decrease in the annual energy costs.” So, if energy efficiency improvements can add to a home’s value, how can a person finance the energy upgrades? Here is where the Energy Efficient Mortgage (EEM) can be very attractive.

Certified Home Energy Rater

These energy-related mortgages provide a proven method for financing viable energy improvements through the use of a knowledgeable energy person called a “Certified Home Energy Rater” or “rater.” An energy rater conducts a comprehensive energy analysis of a residential building using proprietary software and a “blower door,” which is a calibrated testing device designed to either pressurize or depressurize a building. The blower door helps determine the total amount of air leakage for a particular building, normally in terms of air changes per hour (ACH), and also helps the rater and owner find the air leaks. Why is this important? Air leakage is typically a major contributor to a building’s energy bills and is one of the easier and less expensive items to fix, if you know where the leaks are. Some energy ratings also include the use of an infrared (thermal) imaging camera and other test equipment, but all ratings should include the blower door and rating software.

Energy index

Once the energy efficiency of the building is determined, the rating software then assigns a numerical score or “energy index” number to that particular structure. If the score is 100, then the building basically meets the energy code for that jurisdiction. If the number is above 100, the building is less energy efficient and if the number is below 100, then the building is more energy-efficient. In other words: Just like golf, lower numbers are better. An index number of “0” means that the building is achieving a zero-energy score, sometimes called a “zero-energy home.”

Energy Improvements Return-on-Investment

While the majority of homes and other residences will likely never achieve a “zero-energy” score, this doesn’t mean that saving energy isn’t important. Many energy improvements have a return-on-investment (ROI) that is significantly better than the stock market, local bank savings account or even the bond market or CDs. If the idea of obtaining an energy-related mortgage is interesting to you, you will probably think, “How can I get such a mortgage?” The short answer is, “Everywhere!” This is because the secondary housing financing market, such as Fannie Mae, Freddie Mac, FHA, VA and others have provisions for purchasing energy mortgages that are originated by the primary market, i.e. banks, mortgage brokers, savings and loan institutions and others involved in home financing or home improvement loans. The secondary market will “buy the paper” generated by the primary market, so energy-related mortgages are available for everyone … at least in theory.

What Lender Has An Energy Efficient Mortgage?

The main problem has been that many banks and other lending institutions aren’t aware of or aren’t disclosing that energy efficient mortgage options are available to their customers. This is changing, however, because lending institutions are now rethinking their loan processes and are finding that energy-efficient buildings are a good investment. Encouraging energy-related mortgages will begin to translate into encouraging energy-efficient construction and/or remodeling. The banks benefit by having a better loan portfolio from promoting energy efficiency, and the customer/client wins by owning a more energy efficient building. Even the energy providers gain benefits through this process because they can make their “product” go further or can possibly experience lower peaks during extreme conditions.

To learn more about EEMs, visit Residential Energy Services Network or Energy Star. You can also find a wealth of information by searching for the terms “Energy Efficient Mortgage” or “203k Energy Efficient Mortgage” online. If you have questions about this article, please feel free to contact the author.

— Kenneth C. Riead , Senior CEM/CDSM – Certified HERS Rater, Hathmore Technologies

This article was orignally posted on Motherearthnews.com A special thanks to Ken for allowing me to reprint this article here on AskThe203klender and the answer to “What Lender Has An Energy Efficient Mortgage ?” is me so call: 1-800-689-6001 or email me: info@203kkc.com to discuss upgrading your homes’ energy efficiency with an Energy Efficient Mortgage.

203k Financing For Energy Efficient Windows

by Dustan Shepherd

Should We Include New Energy Efficient Windows In Our 203k Renovation Project?

One of the primary renovation items that I see in most 203k loan packages are new windows. However, I am always surprised at how little research is completed on the thermal energy efficiency of the chosen window. New materials and insulated glazing have made single (and double-hung) windows much more energy efficient. Combined with their simplicity and reduced cost, these improved energy benefits have helped to sustain their popularity. Both windows types, if chosen with the proper thermal energy glazing will qualify as allowable improvements for both a FHA Energy Efficient Mortgage (EEM) and a FHA 203k mortgage with the Energy Efficient Mortgage add-on.

What’s the difference between single-hung and double-hung windows?

Fundamentally, they are the same because they both have two panes, one above the other. A single-hung window has a fixed top sash that does not move, while both panes of a double hung slide vertically. An added feature to both single and double hung windows is the operating sashes are designed to allow the movable sash to tilt-in for better access. Both are commonly available in the same sizes, shapes and colors.

A Fixed Window Is Not The Same as A Single-Hung Window

In some instances, a fixed window may be referred to as a single-hung window. A fixed window is a window that does not operate at all. It is a solid piece of glass in a frame. This is not the same as a single-hung window.

Price Can Be The Main Difference

When comparing the two types, price can be the main difference. The construction of single-hung windows makes them less expensive. Choosing single hung windows over double hung can save from twenty to thirty percent on the original purchase price. When choosing between the two, it is important to compare the relatively minor savings with the potential impact on your home’s resale value. Comparing the thermal efficiency of both windows is also a cost factor and will be discussed later.

Ventilation

One of the big differences between the two types of windows is the amount of ventilation and flexibility provided by a double-hung window. If you need increased airflow, opening the top and bottom improves circulation. For example, you can open the bottom sash on the side of the house the breeze is coming from and the top sash on the opposite side to create natural cross-ventilation.

Easy To Clean

The biggest operating advantage is that a double hung can tilt both sashes in for easy cleaning. With a single, cleaning the fixed pane is going to require a trip outside and can be a real hassle on bothersome upper-level windows

More Energy Efficient

Along with picking the most appropriate operating unit for your needs is the choice of the glazing system, the primary component of the unit’s overall thermal energy efficiency. Products with “clear” glass are the least efficient, while those with Low-E are much more thermally effective. The better performing windows are those using Low-E glass with Argon or Krypton gas.

A Low-emittance (Low-E) is a coating that increases a window’s ability to diminish heat transfer, thus saving heating and cooling costs. In addition to energy savings, Low-E also effectively reduces the amount of transmitted ultraviolet light which can damage carpets, fabrics, and drapes.

A Low-E Glass and Argon gas is placed between the glass for superior thermal efficiency. Argon gas is much heavier than air, making it more difficult for warm or cold air to pass through. This glazing choice will meet or exceed most local building code requirements and provides ENERGY STAR® qualified performance.

A Double Low-E/Argon is the top of the line glazing system utilizes Low-E coating on both pieces of glass for increased UV protection and more heat transfer resistance. Argon gas between the glass makes warm or cold air pass through more difficult, thus saving energy.

Feel free to contact me at: info@203kkc.com or call at 1-800-689-6001

Stop Wasting H2O! Make Home Upgrades with a 203k Loan

April 24, 2011

From cooking to cleaning and manufacturing to shipping, humans consume excessive amounts of the earth’s most precious resource. Since only 1 percent of the earth’s water is available for human consumption, we need to reduce the amount of water we use. A 203k loan allows for system upgrades to take advantage of energy savings. An [...]

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Milwaukee program helps homeowners reduce energy costs

March 3, 2011

As I visit with borrowers and municipalities across the country I am beginning to see a real ground swell toward finding ways to assist homeowners in reducing their energy cost. Through a combination of grants and forgivable loans we are starting to see many viable funding models that reflect participation of both private and public entities. The FHA Energy Efficient [...]

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Missouri Gets On The Energy Conservation Bandwagon

February 11, 2011

Missouri has long been viewed as a laggard when it comes to energy conservation. Now, is the state ready to play catch-up? A recent study highlights plenty of opportunity to cut energy use. Rules finalized by regulators this week could help achieve that potential by giving utilities incentives to invest in promoting energy efficiency. A [...]

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2011 Green Wish list For Housing

January 22, 2011

Over the years I have followed the Environmental Building News located at buildinggreen.com. This issue marks the 20th year for the publication. Their first article for the year ”A Green Building Wish List: Policies, Trends, and Products for 2011 and Beyond” is a must read for all residential real estate professionals. I hope you will hit the link [...]

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