With millions of people working remotely amid the COVID-19 pandemic, homes have turned into makeshift offices for everyone from single adults to parents with kids of all ages, learning online.
The ripple effect of the pandemic is spiking residential electricity consumption and utility expenses. It’s also introducing potential problems for energy suppliers and distributors, reminding homeowners and homebuyers of the benefits of generating solar-powered electricity.
As a result, lenders and real estate professionals (REPs) have an opportunity to explain how energy efficiency or “green” mortgages could affordably fund the purchase of a home and drive immediate improvements to slash utility costs. Energy efficiency or green mortgage is financing that effectively credits a property’s energy efficiency level into the actual loan.
Freddie Mac research found that homes sold at a higher price when rated on the amount of and how efficiently they use energy. The better the ratings, the higher the potential savings on utility bills. The study, which looked at homes rated by RESNET’s Home Energy Rating System (HERS), found that:
On average, homes with HERS ratings sold for 2.7% more than unrated ones.
Homes with better HERS Index scores sold for 3 to 5% more than lesser-rated homes.
Homeowners can benefit from more in-depth ratings because of more sophisticated testing equipment. Raters can better quantify the return on improvement expenses in reduced utility costs and increase a home’s market value by installing new windows, an insulated attic, or new air ducts.
Mortgage financing can help borrowers remain long-term homeowners
While other loan options exist to pay for home improvements, funding energy upgrades through mortgage financing comes with practical benefits. An agent could show a client properties that, if made more energy efficient, would be more affordable to own and, in turn, more appealing to buy. For lenders and borrowers, it’s a single transaction with only one set of closing costs and fees—saving time and money for both parties.
The draw of lower energy bills was powerful before COVID-19 gripped the country. For homeowners in a position to refinance, the impact of external circumstances could show them the value of a green mortgage. And for lenders, it’s an opportunity to grow business.