Green Mortgage: A Quick Overview

by Allen Quay

in Home Improvement


There are cost effective mortgages for (a) homes that are energy efficient and (b) property owners who wants to make their current property energy efficient. A green mortgage or energy efficient mortgage can provide homeowners the opportunity to borrow money for upgrades to energy efficient levels in their properties. Renovations can include:

  • Repairing or replacing the current chimney
  • Installing passive or active solar technology
  • Installation of a tank-less water heaters
  • Installing double paned windows
  • Installing a modern HVAC systems
  • Installing insulation


The idea is to encourage eco-friendly living spaces that use fewer resources for cooling and heating. Fannie Mae, the Federal Housing Administration and the Department of Veteran Affairs have green mortgage programs. Freddie Mac offers projected utility savings by taking upgrades into the equation when establishing loan amounts.


Green mortgages logo



While details may vary depending on the mortgage lenders and companies, there are three distinctive types of green mortgages.

  • Conventional EEM – Offered by lenders selling properties to Fannie Mae or Freddie Mac. Borrow up to 15% of the property’s appraised value to upgrade green levels
  • Federal Housing Administration EEM – Borrow up to 5% of property value or $4,000, whichever is greater. The maximum on the loan is $8,000
  • Veterans Administration EEM – For past and present military personnel. If purchasing an existing property, allowed green upgrades of up to $6,000, regardless of property value



If your home is currently energy efficient, financing could be approved. Approval will also depend on the inspection rating. If the property needs some upgrades, improvement cost must be determined before contacting a lender. After an initial consultation, they’ll suggest a licensed energy rater to inspect the property. The rater will present a report in the form of a Home Energy Rating System, or HERS, which is provided to both homeowners and lenders. HERS costs between $300 and $800 and usually includes:

  • Rating of property as is
  • Recommendations for upgrades
  • Estimated pricing, savings and life of upgrades
  • Estimate of property’s rating after upgrades
  • Before and after estimations of property’s annual energy costs



[pullquote]Energy efficient mortgages are not second mortgages since it is rolled into a current mortgage and the owner continues making one payment.[/pullquote]Energy efficient mortgages are not second mortgages since it is rolled into a current mortgage and the owner continues making one payment. There are green mortgage with discounts on fees and/or interest rates for energy efficient certified properties.



An energy efficient mortgage is an excellent way for homeowners to save money in the long term and an incomparable way to change one’s footprint. You can get credit for existing eligible utilities. They also provide peace of mind to you, your family and your guests as you all benefit from a healthier environment.


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