Refinance with an energy efficient mortgage loan

You’ve probably heard about energy efficient mortgages that allow you to benefit by buying a home with energy saving characteristics. If that sounds appealing, but you want to stay in your current home, you will be happy to know there is a way to refinance and turn your current loan into an energy efficient loan.

The purpose of an energy efficient loan is to enable a buyer to spend more on a home because s/he is spending less on monthly energy costs. Refinancing with an energy efficient loan works much the same way.

1. Inform your lender that you want to refinance with an energy efficient loan.
2. Have an Energy Rater conduct a HERS (Home Energy Rating Systems) report. A HERS report looks at the home’s insulation, windows, the local climate, and utility rate to give the home a score. The report indicates the rating, any recommended upgrades, the score after any upgrades, and the total energy costs before and after upgrades.
3. The lender puts funds in an escrow to pay for the improvements.
4. You close on the energy efficient refinance loan.
5. After the improvements are completed, the escrow is cleared.

The HERS report tells you what upgrades your current home needs in order to become energy efficient. The refinanced energy efficient loan pays for those upgrades. It gives you the benefit of the energy efficient loan without having to move. Also, the improvements save you money. A home with leaky windows or poor insulation lets the cool air out in the summer and the warm air out in the winter. This adds up quickly in energy costs. By using an energy efficient refinance loan to make improvements, the utility costs go down. Even though the mortgage may increase due to the refinance, the lower utility costs should be a much greater savings. Also, the resale value of your home may be increased.

If you are considering refinancing with an energy efficient loan, consider your options carefully. Calculate your current mortgage plus energy costs and compare the figures to your projected mortgage and energy costs after the upgrades. If it looks like mortgage refinancing can save you money, talk to your lender and see if it is right for you.


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