ENERGY STAR Mortgages: Frequently Asked Questions for Consumers

Who is eligible?

ENERGY STAR Mortgage is available to all homeowners who are either buying a home that has earned the ENERGY STAR label, or are participating in Home Performance with ENERGY STAR, or those looking to make energy efficiency improvements to their homes and meet the income eligibility requirement of 80% of Adjusted Median Income. In the case of making improvements to an existing home, the borrower must choose improvements that have been identified by participating energy auditors as being the most cost effective for increasing energy efficiency. Following loan closing, the borrower will have 90 days to implement the energy improvements.

What homes can qualify for an ENERGY STAR mortgage?

To qualify, a home being financed must either be ENERGY STAR certified, undergo a Home Performance with ENERGY STAR assessment and improvement process that yields at least a 20% total energy savings, or achieve at least 20% total energy savings via participation in a Weatherization Assistance Program. The home must also be single-family (1–4 families) and owner-occupied.

How do I apply for an ENERGY STAR mortgage?

The program is available in Maine and Colorado . Contact a participating lender in those states and ask about an ENERGY STAR mortgage. Work is underway to bring the program to other states including Massachusetts, New York, New Jersey, Pennsylvania, and the District of Columbia. Homeowners and homebuyers should contact their state representatives, state energy offices, and state housing finance agencies and urge them to support the ENERGY STAR Mortgage.

Is an ENERGY STAR mortgage the same as an Energy Efficient Mortgage (EEM) or an Energy Improvement Mortgage (EIM)?

While an ENERGY STAR mortgage, an EEM and an EIM all take into account the savings associated with reduced home energy use, the ENERGY STAR Mortgage program has requirements that are different than those of the EEM and EIM programs offered through Fannie Mae, Freddie Mac, FHA, and VA, although borrowers could apply for a mortgage that qualifies as an ENERGY STAR mortgage and an EEM or EIM. For example, a borrower could receive the financial benefit provided by a participating lender for an ENERGY STAR mortgage and also qualify for an EEM, thus taking advantage of the EEM's benefit of permitting the use of higher expense to income and debt to income ratios.

How much money can this program save me?

Potentially a significant amount. During the 90 days following the closing of your mortgage, various improvements will be made to your home, which can include air sealing, duct sealing, insulation, furnace replacement, installation of new appliances and more. In Colorado, these kinds of efficiency renovations have resulted in a 30% savings on monthly utility bills. On a $200K mortgage, for example, a ¼ point discount on the interest rate can reduce the monthly payment by $40 to $50. Combined with savings on energy bills, a customer may save $90–$130 month.

These savings should be measured against any increase in mortgage payments resulting from the home improvement loan. In this example, the average consumer would have a net savings of roughly $50 a month. Of course, these savings are in addition to the benefits of living in a house that is worth more money, more comfortable, and simply a better home. Moreover, due to the lower interest rate, in the end the mortgage will be paid off just as quickly as an ordinary mortgage.

How will refinancing with an ENERGY STAR Mortgage have an impact on my monthly expenses?

In the above example, the homeowner saves substantially on total expenses for mortgage and energy. Plus, the resulting modernized home is more comfortable, more valuable and costs less to maintain. You may save even more money if you refinance with ENERGY STAR Mortgage at a time when the interest rate is lower than your current rate. And the savings will keep on growing as utility rates rise in the future.

Can I combine other incentives, grants, or rebates to help lower the cost of an ENERGY STAR mortgage?

Yes, borrowers can use other incentives, grants, or rebates being offered at the federal, state, or local levels to help lower their borrowing costs for an ENERGY STAR Mortgage.