More Financial Options

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In addition to energy mortgages, there are many other loans available to help pay for your energy upgrades. Some are traditional home improvement loans. Others, specifically designed for energy-efficient retrofits, have added benefits such as lower interest rates. And for low-income home owners, there may be loans with very low to no interest, or other special benefits.

Loans are usually offered at the local level through partnerships of utilities, banks, secondary lenders, and non-profit conservation groups. There are also loans offered at the federal level, but ultimately these are doled out locally through state agencies and local utilities. Some loans may require a home energy rating; others do not. Energy loans may run as low as a few hundred dollars or up into the tens of thousands of dollars.

One useful HUD/FHA loan offered nationwide is the Title 1 home improvement loan. Homeowners may borrow up to $25,000 for general home improvements including, but not limited to, energy upgrades.

Another is HUD's 203(k) loan to purchase a home in need of repair or modernization. Under this program you can get one mortgage loan, at a long-term fixed or adjustable rate, to finance both the acquisition and the rehabilitation of the property. The local HUD field office in your area can provide more information on these loans.

Dollar limits for energy loans are generally lower than for traditional home improvement loans, but so are the interest rates. Using an energy loan to supplement a home improvement loan could help reduce overall interest rates and could help you afford more efficient retrofits.

Rebates, Grants, Free Services

Utilities and the government have programs to promote energy conservation and to help people save on energy bills. Some programs are for the general public. Others are targeted specifically toward low income, elderly, and/or people with disabilities.

For years, rebates and grants for energy-efficient products were the most common ways to defray costs on energy upgrades. Currently these are declining due to government spending cuts and changes in the utility industry. Yet, in some regions, you can still find good opportunities if you take the time to look.

Here are just some of the items that may come with customer incentives in your area:

  • Duct repairs
  • Energy-efficient heat pumps, gas heaters, and boilers
  • Energy-efficient light bulbs
  • Low-flow toilets and showerheads
  • Solar domestic hot water heaters
  • Storm windows
  • Water heater insulation
  • Weatherization assistance (Sometimes only for low income people and the elderly)

Some utilities offer free or reduced-rate installation of qualified improvements. In addition, many utilities offer energy audits for free or at low rates. These are not generally accepted in obtaining an EEM, but they are very useful for learning what energy improvements your home needs.

Sample Energy Loan

Energy loans vary quite a bit. Here is what one might look like:

A local utility joins with a bank to offer energy loans with below-market interest rates. If you are a customer of the utility you may borrow up to $25,000 for a high-efficiency heat pump, an energy-efficient water heater, insulation improvements, and duct repairs.

Interest rates on loans are tiered:

  • up to $5000 @ 6%
  • $5000-$10,000 @ 8%
  • $10,000-$18,000 @ 10%
  • $18,000-$25,000 @ 12%.

Excerpted with permission from No-Regrets Remodeling by Home Energy (1997)