Energy Efficient Mortgage (EEM)

From Swikipedia

Introduction

Energy Efficient Mortgage (EEM) is a mortgage that figures conserved energy into the loan in the form of credits as an energy-efficiency incentive, mostly for new homes already certified as energy efficient.

Brief Description

It credits a home’s energy efficiency in the mortgage itself. EEMs give borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans thereby allowing borrowers to qualify for a larger loan amount and a better, more energy-efficient home.

EEMs are typically used to purchase a new home that is already energy efficient such as an ENERGY STAR qualified home. The term EEM is commonly used to refer to all types of energy mortgages including Energy Improvement Mortgages (EIMs), which are used to purchase existing homes that will have energy efficiency improvements made to them. EIMs allow borrowers to include the cost of energy-efficiency improvements to an existing home in the mortgage without increasing the down payment. EIMs allow the borrower to use the money saved in utility bills to finance energy improvements. Both EEMs and EIMs typically require a home energy rating to provide the lender with the estimated monthly energy savings and the value of the energy efficiency measures — known as the Energy Savings Value.

Steps to EEM:

1. While applying for a mortgage, one needs to tell the lender that he/she needs an EEM

2. Get an energy audit done for the house

3. Decide which cost-effective improvements are wanted and contract with a remodeler

4. The lender gets the rating certificate and puts extra funds into a holdback account

5. When the loan closes, upgrades are installed and the holdback funds are released

References:

http://www.greenresourcecouncil.org/glossary.cfm

http://hes.lbl.gov/hes/makingithappen/no_regrets/eemhowtoget.html

http://www.energystar.gov/index.cfm?c=bldrs_lenders_raters.energy_efficient_mortgage