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Green Mortgages for Real Estate

Green Mortgages for Real Estate provide savings with financing and with energy bills

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Green Real Estate Mortgages in Slow Markets

Ironically, a slow real estate market can lift demand for green mortgages. Indeed, it may be possible to use an existing home’s energy inefficiency to bargain down the selling price. “We suggest an energy audit during escrow so a buyer knows what their energy costs will be on the house,” says Joel Baral of Modern Earth Finance. “Then, he can ask the seller to pay for the repairs or plan ahead for the upgrades.”

A green mortgage resembles a traditional mortgage in every way but one: It rewards homeowners for being environmentally conscious. With an energy-efficient house, you spend less money each month for electricity, natural gas and/or oil—sometimes by several hundred dollars or more. If you’re looking to move into a larger home, you could afford a higher mortgage payment and can get approved for a bigger mortgage. In addition, some lenders may reduce the interest rate and points and other fees due at signing.

Green Mortgage Programs

There are a variety of green mortgage programs to choose from, whether you’re buying a new house or want to upgrade your current home. Here are some ideas:

A first mortgage can buy a house that is certified as energy-efficient. Most likely, this will be a new home that is built by a green builder.

A construction loan is the wise choice if you’d rather build a green house from scratch.

Refinance an existing mortgage and use the extra cash to upgrade insulation, replace old appliances with Energy Star-rated brands, improve HVAC systems and install solar panels, for a start.

Open a home equity line of credit to make your house more energy-efficient.

Bank or Broker?

Some traditional banks and credit unions have added green mortgages to their menu of home finance solutions. Buyers who purchase a new green house can receive a discount off their interest rate.

A growing number of mortgage brokers and lenders are solely focusing on green mortgages. Modern Earth Finance, in Encino, Calif., offers its Green Progress Loan to homeowners who want to buy a new green home, purchase and remodel an existing home, or turn their current home into a model of energy efficiency. Modern Earth cuts the interest rate on its loans by an eighth of a point and reduces closing costs by up to 25 percent, depending on the program.

The federal government has also gotten into the act. The Federal Housing Administration and Department of Veterans Affairs offer an Energy Efficient Mortgage, or EEM, and both Fannie Mae and Freddie Mac underwrite EEMs from traditional lenders.

Edited by Carolyn Allen, owner/editor of California Green Solutions
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