Financing a Home Improvement


If you're thinking of refinancing your home to pay for your remodel, or you want to buy a house and fix it up, you can get an energy-efficient mortgage (EEM) to cover the costs of energy upgrades. These mortgages let you roll the cost of those improvements into your home loan. With a really well-designed EEM, you end up not spending a cent for the energy measures.

There are EEMs for remodeling (in some areas these are called energy improvement mortgages, or EIMS) and others for purchasing houses that are already considered energy efficient. The latter allows homebuyers to qualify for more house with less income because utility bills will be low.

If you are remodeling your home with the intention of selling it, remember energy efficiency adds value. You can get an EEM to do the upgrades, then sell your home at a higher price to a buyer who is taking advantage of an EEM to buy an energy-efficient home!


Cost Savings with an
Energy-Efficient Mortgage

Compare the monthly housing costs of a remodeling EEM against those of a standard loan, both secured through the Federal Housing Authority.
Loan-Related Expense Standard Loan EEM
Purchase Price $100,000 $100,000
Cost of Energy Improvements n/a 4,000
Adjusted Purchase Price 100,000 104,000
Mortgage Loan Amount 100% 100,000 104,000
Monthly Principal Interest 730 759
Monthly Taxes and Insurance 150 150
Total Monthly Mortgage 880 909
Monthly Utilities 126 71
Total Monthly Housing Expense 1006 980


Benefits to the Homeowner:
  • $26 per month net savings
  • $312 per year net savings
  • A more comfortable, more valuable home at no extra cost
    		•  
    Cash and Comfort

    Mike and Debbie Brown decided to buy the house they had been renting for five years using an EEM. They added $3,250 onto their base mortgage to cover weatherization and other energy improvements.

    All the costs of the energy improvements were paid for through the FHA mortgage, including the cost of the energy rating, so there were no out-of-pocket expenses.

    The improvements were installed as soon as the loan went through. The Brown's mortgage increased by $21.61 a month to cover the energy upgrades. But their utility bills dropped by over $90 a month, leaving them an extra $720 a year. And they own a more valuable house that's comfortable year round.


    More on financing a home improvement:
  • Details on Energy-Efficient Mortgages (EEMs)
  • How to Get an Energy-Efficient Mortgage (EEM)
  • More Financial Options
  • Getting the Information You Need

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