You can get a larger tax deduction with the EEM because the interest on mortgage payments is tax-deductible. This can save you more money than paying for energy upgrades with a credit card, bank loan, or cash, since neither is generally tax-deductible. The EEM program recognizes that an energy efficient home will have lower operating costs, making it more affordable for homeowners. Cost-effective energy improvements can reduce utility bills and make more income available for mortgage payments.
One potentially overlooked benefit of an EEM is that it can increase your purchasing power when you are in the market to buy a home. Lenders know that homes that meet energy efficiency standards have lower utility costs, and in turn, the money you save on utilities can go toward your mortgage. This increased ability to cover monthly mortgage payments could help you qualify for a larger loan amount. EMEs are available as home purchase loans or refinance loans.
A refinance can help homeowners pay off debts related to the energy efficiency of homes, such as a PACE loan, or to take advantage of the accumulated capital of the home to make energy-efficient home improvements. Energy-efficient mortgages tend to have better rates than other fixed-rate mortgages and energy-efficient homes tend to have lower utility bills. The FHA Energy Efficient Mortgage (EEM) program helps families save money on their utility bills by allowing them to finance energy efficiency improvements with their FHA-insured mortgage. The EEMs recognize that reducing utility costs may allow the homeowner to pay a higher mortgage to cover the cost of energy improvements in addition to the approved mortgage.
Government entities can determine eligible clean energy technologies, develop mortgage eligibility requirements and underwriting rules, evaluate mortgage applications, and issue EMEs. Energy-efficient mortgages (EEM) include the cost of clean energy improvements, such as renewable energy and the installation of energy-efficient windows, in a single principal mortgage during the purchase or refinancing of residential real estate. Several federal agencies and government-sponsored companies offer EEMs, such as the National Federal Mortgage Association (Fannie Mae), the Federal Housing Administration (FHA), the Federal Mortgage and Mortgage Corporation (Freddie Mac) and the U.