What is an Energy Mortgage?

An energy mortgage is essentially a mortgage that credits a home's energy efficiency in the home loan.

  • For an already energy efficient home, this could allow the borrower a greater debt-to-income ratio, thereby giving the homebuyer the ability to buy a higher quality home due to lower monthly heating and cooling costs.
  • For homes where energy efficiency can be improved, an energy mortgage allows money saved in monthly utility bills to finance energy improvements.

A variety of energy mortgages have appeared in recent years and more are anticipated as the Residential Energy Services Network (RESNET), the operating home energy rating systems and the Environmental Protection Agency increase education and information outreach.

Energy mortgages come in two basic categories:

  1. Energy efficient mortgages, which are used to finance homes that are already energy efficient.
  2. Energy improvement mortgages, which are used to improve the efficiency of existing homes.

Energy mortgages are sponsored by both federally insured mortgages programs (i.e., Federal Housing Administration and Veterans Administration), as well as the conventional secondary mortgage market (i.e., Fannie Mae and Freddie Mac).

As America’s interest in improving energy efficiency continues to grow, so does the availability of energy mortgages. A variety of approaches have been piloted in select states and several energy mortgage programs are now available nationwide. The two types of energy mortgages are Energy Efficient Mortgages (EEMs) and Energy Improvement Mortgages (EIMs).