New mortgage lets you borrow money for energy-efficiency upgrades

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New mortgage lets you borrow money for energy-efficiency upgrades
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Want to make some energy-efficient upgrades to your existing home or a new one you’re getting ready to buy? Maybe you’re finding it difficult to come up with the cash. That’s where some new programs from the two giant mortgage clearinghouses in our country can help you out.

Read more: Solar panel installation guide

Fannie Mae and Freddie Mac want to give you green to go green

Adding insulation, installing water-conserving toilets, replacing the HVAC system, getting rid of leaky old windows and doors and installing solar panels can be costly propositions — even though we all know the return on investment you get from lower energy bills is great.

Fannie Mae understands and has a new mortgage program called the HomeStyle Energy mortgage. Basically, this program allows you to borrow for energy-efficient upgrades and roll the cost into the mortgage. (This pertains to both new mortgages and refinances.)

As for the interest rate, those with good credit can pay around 4% in the current market.

Here are some pertinent details of the HomeStyle Energy mortgage:

  • There’s a maximum debt-to-income limit of 38% for borrowers.
  • You can’t borrow more than 15% of the as-completed appraised value of the home for energy upgrades.
  • Whatever money you borrow that’s dedicated to home improvements is stashed in an escrow account overseen by the lender until you need it.
  • Appraisers will determine the as-completed, enhanced valuation of the property that’s expected once all the work is done. They will also verify that all intended work gets completed.
  • If you need to borrow more than $3,500 in total, you must have an energy-efficiency analysis like a HERS (Home Energy Rating Systems) report done on your home.

Not to be outdone by its competitor, Freddie Mac also offers its own program according to real estate reporter Kenneth Harney.

The Freddie Mac option is a bit more flexible:

  • No cap on the percentage of as-completed appraised value that can go for energy improvements.
  • No requirement for a mandatory residential home energy report.
  • There’s a maximum debt-to-income limit of 45% for borrowers.

If you’re interested in either program, be sure to talk with your lender for further details.


Thinking about solar for your home? There’s a 30% federal investment tax credit if you buy the panels and have them installed, rather than leasing them.

Consider the following before taking the plunge…

Get ready for your quote

The process starts by going online to a solar company’s website and putting in your street address. This will allow the company to use a satellite map to pinpoint your home and assess your solar potential. Have your past year’s electric bills handy, because you’ll be asked about your energy usage.

Your property will also need a fairly clear shot of the Southern sky. Don’t worry if your roof is too shaded. You can still have ground-mount panels installed in a sunny spot on your property.

Some of the more popular solar companies include SolarCity.com, SunRun.com, Sungevity.com and Us.SunPowerCorp.com.

Know the right questions to ask

Always remember to ask these questions of any company you’re vetting to do an installation.

  • How long has the company been in business?
  • How many systems have they installed?
  • How long will the installation take?
  • Who pays for the permits?
  • Is it a roof-mount system or ground-mount system?
  • Who applies for any grants and submits all the paperwork?

Explore your alternatives 

You might want to consider solar shingles if you live in a restrictive covenant community that prohibits traditional panels. The solar shingles are small and they look just like the traditional asphalt ones you’re used to. They even get nailed to your roof in the same way! You just need an electrician to hook them up to your home’s electrical system.

Solar shingles are not as efficient as traditional solar panels, but The New York Times reports they can offset your bill by 40 to 80%, and they’re typically 15% cheaper than a solar panel system. Visit DowPowerHouse.com for more details. So far they’re only being sold in select states like California, Colorado and Texas, among others.

Going green gets you more green at resale

In 2011, the Lawrence Berkeley National Laboratory released the results of a nearly decade-long study of home resale values in California. The study found the typical home with whole house solar sold for $17,000 more than a home that didn’t have it in the state. That can recoup virtually all, if not all, of any installation costs.

In a similar vein, green-certified homes can command 9% more in offers when it’s time to resell. That’s according to a 2012 study out of UCLA that looked at sales of more than 1 million California homes between 2007 and early 2012.

Read more: 9 air conditioning alternatives

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Theo Thimou About the author:
Theo has co-written several books with Clark Howard, including the New York Times #1 bestseller Living Large in Lean Times. As a single widowed parent of two young children, he strives to bring unique savings tips to men and women like him who must face life without their spouses. He can be reached at [email protected]
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