Homeowners receive an “as is” rating, a projected rating after improvements, an estimate of annual savings and present value of energy savings for lenders and appraisers. In existing homes, owners can prioritize the most cost-effective improvements. Buyers can use the information from a home energy rating certificate to compare the energy performance of properties they might be considering.

Energy Efficient Financing

Both energy audits and energy ratings help homeowners save money by identifying energy efficient improvements. However, home energy ratings verify energy performance for the EPA’s ENERGY STAR Homes Program and energy efficient mortgages (EEMs).

Inclusion in the ENERGY STAR Homes program means owners can expect 15% savings on heating and cooling compared to non verified homes. Builders who integrate ENERGY STAR guidelines and home energy rating certificates increase the value of their product. Buyers benefit with more efficient, less costly homes that qualify for energy efficient mortgages (EEMs).

There are two types of energy mortgages. An energy efficient mortgage considers the expected energy savings of a new energy efficient home and boosts the borrowing power of buyers by allowing them a bigger mortgage. An energy improvement mortgage considers the costs and savings associated with energy improvements in an existing home and allows homeowners or homebuyers to finance the upgrades through their mortgage.

A certified energy efficient home gives both buyers and homeowners more loan options. The decreased operating costs allow borrowers to qualify for higher mortgages or energy efficient mortgages (EEMs). Rating certificates allow lenders to factor in costs of improvements and borrowers can qualify for an energy improvement mortgage, to improve a home before they move in. Homeowners can use energy improvement mortgages to upgrade their home’s performance for their own benefit or to increase its value and appeal before selling.

Perennial Energy Savings

Let’s say you own a home and get a home energy rating. The rating certificate reveals your home's energy efficiency is average - a 60 point, 3 star rating. The suggested improvements include boosting insulation and buying a new furnace. The total estimated costs for the improvements are around $4,000 and projected annual energy cost savings are $400.

You can either pay cash for the improvements and avoid interest or refinance with an energy improvement mortgage through a government-insured or conventional lender. If you pay cash, your improvements will pay back in about 10 years ($4,000 upfront divided by $400 annual savings) and less than half the lifespan of your new furnace and about a third of the lifespan of the new insulation.

If you finance the upgrades, you can expect a net annual savings of $400 because the cost of the mortgage payment for the improvements will be about the same as your monthly energy cost savings.

Finding a Home Energy Rater

Whether you are buying, selling, refinancing or remodeling it makes sense to think about getting a home energy rating certificate and research your options. Most energy efficient financing requires a rating certificate and your lender might have a list of recommended providers.

The type of home energy rating system (HERS) available to you depends on where you live. There are nationally accredited systems, like RESNET, and state specific programs. You can check with your state energy department for state accredited home energy raters. This is a good place to start as you may also find resident programs like special grants, financing or tax credits from your state government.

For nationally accredited systems RESNET provides a listing of certified home energy raters, both RESNET members and other program members (RESNET members are given priority in their listings). RESNET is an industry not-for-profit membership corporation so it also serves as a network of contractors, appraisers and lenders.

Other good resources for energy efficiency initiatives include the U.S. Department of Energy and the EPA’s ENERGY STAR program - both websites are listed below along with other helpful links.

*Note: The information in this article is general advice and not meant as a substitute for personal guidance from a financial advisor, real estate professional, home improvement contractor or legal counsel. Although the author is a licensed realtor, the advice given in this article does not constitute any client contract or agreement between the author and the user. The author is not responsible for any losses, damages or claims that may result from your decisions.