Green Mortgages

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Energy-efficient mortgages—or “green” mortgages—have become increasingly popular in recent years as more homeowners look for ways to reduce their energy costs and their carbon footprint. The impact on the environment can be significant: In one year, the average home produces twice as much greenhouse gas as the typical car. Many homes financed with green mortgages have solar panels installed to reduce heating costs. Photo courtesy of Borrego Solar. A green mortgage resembles a traditional mortgage in every way but one: It rewards homeowners for being environmentally conscious. With an energy-efficient house, you spend less money each month for electricity, natural gas and/or oil—sometimes by several hundred dollars or more. If you’re looking to move into a larger home, you could afford a higher mortgage payment and can get approved for a bigger mortgage. In addition, some lenders may reduce the interest rate and points and other fees due at signing. There are a variety of green mortgage programs to choose from, whether you’re buying a new house or want to upgrade your current home. Here are some ideas: A first mortgage can buy a house that is certified as energy-efficient. Most likely, this will be a new home that is built by a green builder. A construction loan is the wise choice if you’d rather build a green house from scratch. Refinance an existing mortgage and use the extra cash to upgrade insulation, replace old appliances with Energy Star-rated brands, improve HVAC systems and install solar panels, for a start. Open a home equity line of credit to make your house more energy-efficient. Bank or Broker? Some traditional banks and credit unions have added green mortgages to their menu of home finance solutions. Countrywide Home Loans recently introduced its Green Incentive Program, which is currently available to qualified homebuyers in 13 states. Buyers who purchase a new green house receive a discount of one-eighth percent off their interest rate. A growing number of mortgage brokers and lenders are solely focusing on green mortgages. Modern Earth Finance, in Encino, Calif., offers its Green Progress Loan to homeowners who want to buy a new green home, purchase and remodel an existing home, or turn their current home into a model of energy efficiency. Modern Earth cuts the interest rate on its loans by an eighth of a point and reduces closing costs by up to 25 percent, depending on the program.

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