Insulation Pays
As energy prices continue to rise, it pays to insulate--in more
ways than one. Adding more insulation to your home or building can
put money in your pocket.
In addition to lower utility bills, according to the EPA, for
every $1 homeowners saved on annual fuel bills due to
energy-efficient home improvements, their home's value jumped by
$20 or more.
Some local governments and many utility companies offer
consumers cash incentives for simply upgrading their insulation. In
addition, the 2005 Energy Bill outlines several
financial incentives for home owners, home builders and commercial
building owners alike for making energy-saving improvements,
including adding insulation.
Some of the highlights are:
- Tax credits worth $500 each year for 3 years for home owners
who make energy-saving upgrades
- Tax credits for home builders up to $2,000 per home for
exceeding certain energy conservation measures
- A per-square-foot tax deduction for commercial building owners
based on energy efficiency improvements
Lower Mortgage Payments
Planning on financing a new home? Consider an energy-efficient
mortgage to help offset added construction costs due to energy
improvements. The benefits include:
- Allowing borrowers to qualify for a larger mortgage as a result
of energy savings
- Reduced monthly operating costs
- 100% of energy improvements can be financed--up to 15% of the
value of the home for existing homes and 5% of the home's value for
new construction
Eligibility Requirements
The borrower is eligible for the maximum FHA-backed loan,
using standard underwriting procedures. The borrower must make a
3-percent cash investment in the property. This 3% cash investment
is based on the sales price. Closing costs are not included in the
3% calculation but may be used to satisfy the requirement. Any
upfront mortgage insurance premium can be financed as part of the
mortgage.
Eligible properties are one-to four-unit existing and new
construction.
The cost of the energy-efficient improvements that may be
eligible for financing into the mortgage is the greater of 5
percent of the property's value (not to exceed $8,000), or
$4,000.
To be eligible for inclusion in this mortgage, the
energy-efficient improvements must be cost effective, meaning that
the total cost of the improvements is less than the total present
value of the energy saved over the useful life of the energy
improvement.
The cost of the energy improvements and estimate of the energy
savings must be determined by a home energy rating report which is
done by a home energy rating system or energy consultant. The cost
of the energy rating may be financed as part of the cost-effective
energy package.
The energy improvements are installed after the loan closes.
The lender will place the money in an escrow account. The money
will be released to the borrower after an inspection verifies that
the improvements are installed and the energy savings will be
achieved.
The maximum mortgage amount for a single-family unit depends
on its location, and it is adjusted annually. Find FHA Maximum
Mortgage amounts for any county in the
country. The
cost of the eligible energy-efficient improvements is added to the
mortgage amount. The final loan amount can exceed the maximum
mortgage limit by the amount of the energy-efficient
improvements.