Energy Efficient Mortgages

THE ENERGY EFFICIENT MORTGAGE means comfort and savings. When you are buying, selling, refinancing, or remodeling your home, you can increase your comfort and actually save money by using the Energy Efficient Mortgage (EEM). It is easy to use, federally recognized, and can be applied to most home mortgages. EEMs provide the borrower with special benefits when purchasing a home that is energy efficient, or can be made efficient through the installation of energy-saving improvements.

Home owners with lower utility bills have more money in their pocket each month. They can afford to allocate a larger portion of their income to housing expenses. If you have more cash, why not buy a better, more comfortable home? There are two options with the Energy Efficient Mortgage.

Finance Energy Improvements!

Energy Efficient Home

  • Cost-effective energy-saving measures may be financed as part of the mortgage!
  • Make an older, less efficient home more comfortable and affordable!?

Increase Buying Power!

  • Stretch debt-income qualifying ratios on loans for energy-efficient homes!
  • Qualify for a larger loan amount! Buy a better, more energy efficient home!

Who Benefits from the Energy Efficient Mortgage?


  • Qualify for a larger loan on a better home!
  • Get a more comfortable home NOW.
  • Save money every month from day one.
  • Increase the potential resale value of your home.


  • Sell your home more quickly.
  • Make your house affordable to more people.
  • Attract attention in a competitive market.

Pay for energy improvements easily, through your mortgage. Advanced Funding can increase your loan to cover energy improvement costs.

Home Energy Rating Systems (HERS)

A HERS report is similar to a miles-per-gallon rating on a car. HERS are programs which provide an evaluation of an individual home’s energy-efficiency. A HERS report is prepared by a trained Energy Rater. Factors such as insulation, appliance efficiencies, window types, local climate, and utility rates are used to rate the home and calculate energy costs.

A HERS Report Includes:

  • Overall Rating Index of the house as it is.
  • Recommended cost-effective energy upgrades.
  • Estimates of the cost, annual savings, and useful life of upgrades.
  • Improved Rating Index after the installation of recommended upgrades.
  • Estimated annual total energy cost for the existing home before and after upgrades.

A Rating Index is between 1 and 100. A lower index indicates greater efficiency. Cost-effective upgrades are those which will save more money through energy savings than they cost to install.

A HERS rating usually costs between $300 and $800. This could be paid for by the buyer, seller, lender or real estate agent. Sometimes the cost of the rating may be financed as part of the mortgage. No matter how the rating is paid for, it is a very good investment because an EEM could save you or your buyer hundreds of dollars each year.

Why the EEM Works

Energy-efficient homes cost less to own than non-efficient homes, though they may start off with higher price tags.

Older Existing Home            Same Home with Energy Improvements

Home Price                                      $150,000.00                                    $154,816.00
      (90% mortgage, 8% interest)
Loan Amount                                    $135,000.00                                    $139,334.00
Utility Bills                                         $186.00                                            $93.00
True Cost of Ownership                       $1,177.00                                        $1,116.00

Monthly Savings                                                                                                           $61.00
Annual Savings                                                                                                            $732.00

Another EEM option is allowing higher qualifying ratios for borrowers who will occupy a property meeting certain standards for energy efficiency. When the home has been built or retrofitted in conformance with the International Energy Conservation Code (IECC) standards for 2000 or later, then the lender may “stretch” the borrower’s qualifying ratios by approximately 4%.

Which Buyers and Homes are Eligible?

All buyers who qualify for a home loan qualify for the EEM. The EEM is intended to give the buyer additional benefits on top of their usual mortgage deal. The lender will use the energy efficiency of the house, as determined by a HERS rating, to determine what these benefits will be.

Energy Efficient Mortgages can be used on most homes. Availability is not limited by location, home price or utility company.

Eligible Improvements

  • Attic insulation
  • Wall and floor insulation
  • Caulking and weather stripping
  • Replace furnaces, air conditioning and water
  • Windows, doors and sun screens
  • Thermostats
  • Solar heating and cooling system