Energy Efficient Mortgages Reduce Your Monthly Housing Expenses

When a lender figures the monthly mortgage amount that a buyer can afford whether it’s a purchase or a refinance, the amount is calculated to include principle, interest, taxes and insurance or PITI.  But there’s another cost that is beginning to be taken into consideration—utilities.  If you buy an older home with old single pane windows, old appliances, an old furnace, poor insulation, etc., the monthly cost to own the home can increase dramatically.  If you don’t have the money to replace some of these items immediately you could spend hundreds of dollars more each month on energy   costs.  And if you decide to make some of the improvements or buy appliances on your credit card that just adds to your debt at pretty high interest rates.

But the FHA 203(b) loan, or Energy Efficient Mortgage (EEM) Program can help buyers and refinancers to make their homes more energy efficient and save a considerable amount on their monthly utility bills.  “The EEM Program recognizes that the improved energy efficiency of a house can increase its affordability by reducing operating costs.  Because the home is more energy efficient, the occupants will save money on utility costs” and significantly reduce the amount of money needed each month to operate the home. So here’s how it works.  When you take out an FHA 203 (b) loan you can add up to $8,000 to the loan amount even if it goes over the FHA maximum loan amount or over what you qualify for.  This additional amount is at the same rate as the original loan.  So if you lock in at say, 4.25%.  The additional amount is rolled right into the loan at the same rate. Here are some of the things you can do to improve your home’s value and energy efficiency: New windows, insulation, passive or active solar improvements, heating and air conditioning systems, appliances.  Now needless to say $8,000 won’t cover all these things.  So the borrowers needs to determine what things they want to do and how much it will cost.

Prior to settlement the borrower submits a home improvement energy package and the costs to the lender.  Then a HERS  (Home Energy Rating System) energy rater has to inspect the property to determine whether the cost savings over the life of the loan will be greater than the loan amount.  The buyer, seller, lender or agent can pay for the cost for the inspection.  Once the rating assessment has been done and a satisfactory rating has been determined, the lender can escrow the amount of money in the proposal.  All work must be completed within 90 days. Most lenders don’t even know about this loan or if they do they don’t offer it.  Don’t ask me why.  So I was very happy when I found a wonderful loan officer at PMG Mortgage who made it his business to research the loan and convince his company to offer it to borrowers. Vince Coyle  is ready and willing to work with borrowers on this loan product.

Given the low interest rates right now this loan is an excellent way to get a lot more bang for your energy efficiency buck.  Plus, after you make some of these improvements most states have some tax credits and incentives that you might be eligible for.  Here are the federal tax credits that are available now.

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Gale10

Gayle Fleming

http://www.goinggreenhomesva.com

gaylefleming48@aol.com

703-625-1358

My purpose is to serve my clients and advocate for their highest and best good, so they attain their real estate goals.

The End is Near and In With the Old and Out With the New

TAX CREDITS END THIS YEAR

On December 31, 2010 it’s lights out for the federal tax credits for energy-efficient windows, doors, insulation,roofs, hot water heaters and HVAC systems. So if you’ve been putting off making some energy efficient improvements to your home it’s time to stop procrastinating and as the Nike commercial says, “Just do it!”  Until December 31st you can get a tax credit of 30% of your costs up to a maximum of $1500.

Now if you want to really trick out your house with solar panels, residential wind turbines or geothermal heating there is no upper limit to what you can spend to get a 30% tax credit. And this credit is in effect until December 31, 2016.  This link will tell you what you need to know to get the tax credit.

BUT before you rush to do any of these things, have an energy audit.  Getting a tax credit for spending money you don’t need to spend is like buying something on sale that you already have and don’t need just because you’ll save money. When you have an energy audit which will cost you around $300-400, you may find out that you don’t need to spend that $20,000 on new windows–you just need to do some serious air sealing with caulking and insulation.

INSULATION

Speaking of insulation–the best and the most cost-effective insulation aren’t necessarily the same.  In a recent blog on the Green Building Advisor website, Carl Seville, an advisor who certifies green homes, discusses the downside of fiberglass insulation.  This is the insulation that most of us are familiar with and the least expensive choice for insulation. The biggest problem seems to be that it’s hard to install properly. If you’re thinking about doing some insulation before it gets really cold, you might want to check out his post.   Foam and blown in cellulose insulation are considered better choices but do cost more.

REDUCE, REUSE, RECYCLE

This is a motto we would all do well to live by to reduce the burden on our fragile planet.  But this philosophy can do more than save green trees–it can save green backs too.  So maybe you have some home improvements you want to make.  Most people would head for Home Depot or Lowes, right?  Well how about heading for ReBuild Warehouse or ReStore where you can buy new and gently used home improvement products and save more than 50%!  These are both Northern Virginia locations so if you’re reading this blog from another area, check the web to see what’s available in your area.  ReBuild Warehouse is affiliated with a company call Deconstruction, LLC, an environmental company that disassembles homes for builders or home owners doing major rebuilds or remodeling. ReStore is affiliated with and run by Habitat for Humanity

“BABY IT’S (GETTING) COLD OUTSIDE”

I have a great Energy Saver booklet to share with you.  If you email or call me with your address (if I don’t have it) I would be happy to mail it to you.  It has wonderful cost effective advise on energy savings for homes, appliances, cars, electronics, etc.

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Gale10

Gayle Fleming

http://www.goinggreenhomesva.com

gaylefleming48@aol.com

703-625-1358

My purpose is to serve my clients and advocate for their highest and best good, so they attain their real estate goals.

If I Want a Green(er) Home Where Do I Start?

There are no national standards for what a “green” home really is.  The USGBC (United States Green Building Council) has the most recognized green building and retrofitting/remodeling  standards in the country.   But there are others—all with different standards.  There’s the National Association of Home Builders (NAHB), Build It Green and Built Green (yes, different organizations).  Then there are local standards such as Arlington, Virginia’s Green Home Choice Program.  Well you get the picture–whose standards do you use.  But here’s the thing—right now, in the Washington Metro area where I do business, there just aren’t a lot of new homes being built to any particular “green” standards.  Many builders are at least building all new homes to EnergyStar standards.  But as I said last week, energy efficiency alone does not a “green” home make.  And with the exception of USGBC, most of these ratings are for new construction.

So most of my clients are just trying to figure out what things they should do to upgrade and retrofit their older existing homes—either the one they’re buying or the one they’re selling—to make them more eco-friendly.  What is the first thing you should do?  Well I believe reducing your energy consumption is one of the most important and cost effective things to do first.  This isn’t necessarily sexy like putting in cork or bamboo floors or ice stone countertops. But it will have a measurable effect on reducing your impact on dwindling and non-renewable resources as well as significantly reducing utility bills.  Even if your home is only ten years old, it probably pretty energy inefficient.

First, insulate. I know—BOOOORING.  Oh well—so use the money you save on utility bills to buy an Ipad or something.  The cost of heating and cooling a home is 50-60 % of the total energy bill.  A few hundred dollars spent on insulation alone can cut a home’s energy bill by up to 20% per year.  There are many types of insulation and I’m not going to discuss them here.  But there are environmental concerns  to some degree for most of them.  So check out this link that discusses the pros and cons.  Some of the cons do have indoor air quality issues.  I will tell you that my favorite insulation is made from blue jeans. It’s the ultimate in reduce (get rid of some of your 10 pairs of jeans), reuse, and recycle thinking.

Second, air seal–also not exciting.  But like insulation, air sealing stops you from paying to heat and cool the outside of  your home. You can find many leaks simply by feeling the air coming in around doors and windows.  However, many leaks that come from spaces holes in attics, basements and crawl spaces.  These can be harder to find and a much bigger energy waster.  You might consider having a professional energy audit.  Energy auditors use equipment, such as infrared cameras and blower doors,  designed to suss out all the leaks in your house.  Some state energy departments have programs that are free or for a nominal fee, will do an energy rating on your home.

Oh, and by the way– there’s a 30% federal tax credit (up to $1500) on energy efficiency purchases until December 31, 2010. So this is the year to give that home you’re buying or selling, an energy makeover.

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Gale10

Gayle Fleming

http://www.goinggreenhomesva.com

gaylefleming48@aol.com

703-625-1358

My purpose is to serve my clients and advocate for their highest and best good, so they attain their real estate goals.

Fed Tax Credits Stimulate Your Bank Account Save Money and Energy

So you are feeling compelled to do something about the fact that your home heats and air conditions the outside almost as well as it heats and air conditions the inside–maybe better.  Too much money being wasted and too many CO2 emissions being created.  Rather than trying to guess where the leaks in your home are, you’ve had a professional energy auditor rate your home and advise you on what you need to do. 

Now it’s time to act.  Some fixes may be as simple and inexpensive as caulking or weatherstripping.  However if the fix requires the purchase of windows, a furnace or a/c unit, for example, there are some great federal and in some cases, state tax incentives that will help offset the cost.  President Obama’s stimulus package isn’t just for the fat cats.  There is something in it for you and me.   There is a 30% tax credit that can be used to make energy efficient home improvements for things such as insulation, roofs, doors, furnaces, hot water heaters, etc.  Now this is a one time tax credit with a maximum of $1,500. 

 The credit can only be claimed once in either 2009 or 2010.   So if,  for instance, you buy a $3,000 A/C unit in 2009, your tax credit would be $900.  Then you spend $2,000 on insulation which will give you a tax credit of $600.  These two improvements will max out your tax credit of $1,500.  So even if you also have new windows installed you can only claim the credit up to the $1500. And at least for now it’s a one time credit.  That could change of course as the Obama administration pushes for more ways for the country to conserve energy.  The EnergyStarwebsite explains in more detail which improvements qualify for the tax credit.  Be sure to bookmark the EnergyStar link because it has all the guidelines and some efficiency factors have changed.

Now if you really get adventurous and are thinking about geothermal or solar heat, the incentives really heat up, pun intended.  Either one or a combination of both of these options could reduce your energy costs by up to 70 percent.  They are relatively expensive to install but over years they more than pay for themselves.  The tax credit for these is 30% tax credit  with NO  limit on what you spend. The credit can be claimed until 2016.  So if you spend $10,000 on a solar system, for example, your credit is $3,000. 

Some state governments have incentives as well, so check with your state’s  Department of Taxation.  In Virginia , of instance, from October 9th through October 12th their will be no sales tax on certain energy efficient home improvements. Sales tax in Virginia is 5%.  This is modest but many states offer even more incentives.  Maryland as an array of state AND local (county) incentives for residents.  Do your homework before you purchase much needed energy saving products and services and take advantage of everything that’s available to save you money.

Be sure to watch the cute, short video on geothermal heating and cooling.