4 Eco-Friendly Home Improvements That Make a Difference
You don’t need to go completely off-grid to help the environment — there are plenty of eco-friendly home improvements that can help you shrink your utility bill and lower your carbon footprint at the same time. Here’s a closer look at some energy-saving upgrades and the different financing options available to you.
Determining whether a product is truly environmentally friendly is all about looking for the appropriate certifications. Credible organizations — like the Environmental Protection Agency (EPA), USDA Organic, Energy Star program and Green Seal Certified program — all have their own seals of approval that they use to certify that a product is truly good for the environment. Be sure to look out for these certifications as you shop for products and materials.
Want to make an impact? Here’s how to think green with your finances.
4 impactful eco-friendly home improvements
Aside from helping the environment, many eco-home improvements come with the added benefits of helping you achieve cost savings and putting money back in your pocket. With that in mind, here are four eco-friendly home improvements that can make a big difference.
Choose LED light bulbs
If you’re just getting started with going green, switching out your old incandescent light bulbs for an LED version can be a simple swap. LEDs use up to 90% less energy and last up to 25 times longer than traditional, incandescent bulbs, according to the U.S. Department of Energy.
While the cost of LED light bulbs has fallen significantly since they first came on the market, they may still be slightly more expensive upfront than regular bulbs. These days, they cost around $4 per bulb, but they have a lifespan of 10 to 22 years, according to HomeAdvisor. In comparison, incandescent bulbs cost around $3 per bulb, but only last for one year.
You can also help lower costs by replacing your light bulbs as they burn out rather than trying to tackle switching them all out at once.
Install a tankless water heater
As the name suggests, a tankless water heater uses a heating element to heat water on demand rather than keeping hot water stored in a tank. The U.S. Department of Energy estimates that this method is 8% to 34% more energy-efficient than using a conventional storage tank water heater, depending on how much hot water you use.
While labor rates can vary, your typical tank-style water heater will cost around $1,000, compared to a $2,500 price tag for the tankless version. Still, tankless water heaters are projected to last more than 20 years, whereas storage tank options typically last just six to 15 years, according to HomeAdvisor.
Switch to Energy Star appliances
The next time you need to shop for appliances, consider choosing an Energy Star model. Energy Star refrigerators are about 9% more efficient than noncertified models and can save you an estimated $220 in utility costs over a 12-year lifespan. Meanwhile, an Energy Star dishwasher only costs about $35 per year to run and will save more than 3,800 gallons of water over its lifetime.
Invest in solar panels
Investing in solar panels is probably the thing that most people think of first when they consider eco-friendly home improvements — and it’s not hard to see why. While this upgrade can be more expensive than some other options, it can also bring major monthly utility savings and an increase in home value.
The amount you save and the increase in home value you’ll see will depend on your location. However, to give you an idea of what to expect, the U.S. Department of Energy estimates that a home’s value increases by $20 for every $1 reduction in annual utility bills. So, a home that saves $200 per year on energy costs could be worth up to $4,000 more than a home without solar panels.
As far as what you can expect to spend, HomeAdvisor found that the project costs around $27,000 on average. However, it’s possible to take advantage of a wide range of federal and state rebates to help lower the cost. For example, the federal clean energy tax credit is worth 30% of the cost of installation, and your state may offer similar credits as well.
How to finance eco-friendly home improvements
Whether you’re a first-time homebuyer looking to build your own green home or an existing homeowner interested in sustainable home improvements, there are multiple ways to fund your eco-friendly projects, including:
1. Conventional loan
Borrowers have a couple of options for financing eco-home improvements with conventional loans, which are mortgages that aren’t backed by the federal government.
HomeStyle® Energy Mortgage. This loan program — available through private lenders and guaranteed by Fannie Mae — allows buyers to purchase a new home and finance future eco home improvements at the time of the purchase. Down payments can be as low as 3%, but borrowers putting down less than 20% will need to pay for private mortgage insurance (PMI) until they build at least 20% home equity.
GreenCHOICE Mortgage®. Freddie Mac’s loan option for eco-friendly home improvements offers affordable financing for both new home purchases and mortgage refinances. Borrowers combine the mortgage with the cost of making upgrades — up to 15% of the completed value of the property. This loan option is also available to low-income borrowers and those with limited down payment funds, and can be combined with the Freddie Mac Home Possible® program. Borrowers interested in this program must apply through an eligible lender.
2. FHA loan
The Federal Housing Administration’s (FHA) energy-efficient mortgage (EEM) program covers eco-friendly home improvements to an existing property or the purchase of an already energy-efficient home. Like the conventional mortgage options, homeowners finance the cost of eco home upgrades upfront at the time of the purchase or refinance.
With this program, borrowers can put down as little as 3.5% and may qualify for higher loan amounts than typical FHA loan limits, based on the expected cost of the eco home improvements.
Homebuyers can also combine FHA’s EEM with the agency’s 203(k) rehab loan. In addition, under the program, borrowers can also finance targeted green home improvements, like installing a solar or wind system or weatherizing the home.
3. VA loan
Active-duty military members, veterans and eligible military spouses can finance green home improvements with a loan guaranteed by the U.S. Department of Veterans Affairs (VA). The VA EEM program allows borrowers to finance a new eco-friendly home purchase or refinance an existing home, along with the cost of the sustainable home improvements, upfront.
4. Solar loan or manufacturer financing
In addition to the mortgage options that include solar panels as a covered eco home upgrade, homeowners can finance the cost of a solar energy system directly with installers. Some also provide lease options. Manufacturers of other eco home improvement products and services also offer financing options, typically facilitated through installers.
5. Residential Property Assessed Clean Energy (PACE) program
The residential PACE program is a federal initiative administered by some state and local governments. Currently available only in California, Florida and Missouri, homeowners with access to the residential PACE program can receive financing to complete various eco home upgrades. These include updating their HVAC system, installing energy-efficient windows and doors, replacing old appliances and several other improvements.
The program provides an upfront lump sum to complete the green home improvement projects, and homeowners repay the loans over a set time (usually between 10 and 20 years) as an addition to their tax bill.
6. State and local programs
State and local governments, regional banks and utility suppliers offer financing programs, tax credits and other incentives to encourage homeowners to make sustainable improvements and cut down on energy usage.
The resources below can help you find programs available in your area:
- Utility companies with on-bill financing programs
- Database of State Incentives for Renewables & Efficiency®
- Energy Star Rebate Finder
7. Personal loan
Using a personal loan to complete a home improvement project is a popular option among homeowners. Personal loan amounts typically range from $1,000 to $50,000, and the repayment terms can generally vary from six months to seven years. If you use a personal loan to make your eco home upgrades, expect to pay higher interest rates than you would for a mortgage, but lower rates than credit cards.
8. Home equity products
If you have equity in your home, you can access it to make your eco home improvements. Homeowners have three ways to tap their equity: a home equity loan, a home equity line of credit (HELOC) or a cash-out refinance.
- Home equity loans. If you use a home equity loan for green upgrades to your home, you’ll borrow a lump-sum amount against your home equity and repay the loan in fixed monthly installments over a set term.
- HELOC. With a home equity line of credit, you’ll access your home equity, as needed, up to your approved limit. Interest rates are typically variable, and your payments will also fluctuate depending on how much you borrow.
- Cash-out refinance. You can also tap into your home’s equity with a cash-out refinance. You’ll replace your current mortgage with a new one that has a larger loan amount, and pocket the difference between the two loans in a lump sum — which you can use to complete your green home improvements.
