Making eco-friendly improvements to your home can be good for the environment – and your wallet. If you’re looking for ways to go green at home, it’s worth considering eco-friendly home upgrades like installing energy-efficient doors, windows, and appliances or going solar, to name a few.
Your first step to going green: get a home energy audit through your local utility company. A home energy audit is usually offered free of charge. It can help you better understand your household energy usage, what systems or features are inefficient, and what projects to focus on so you can improve your home’s energy efficiency and, hopefully, lower costs in the long run.
What does 'eco-friendly' mean?
Something that’s considered eco-friendly is not harmful to the environment. Taking it a step further, the eco-friendly definition for home improvements include projects that help lessen a home’s carbon footprint and make it more sustainable. Eco-friendly home improvements can also help lower a home’s energy usage or use materials that have less of an impact on the environment than traditional materials and products.
Here’s a look at some of the most common eco-friendly home projects to consider, followed by a list of mortgage options to help you fund these and other green home improvements.
Switch to LED lightbulbs
One of the easiest (and least expensive) eco-friendly home improvements you can make in your home is to ditch incandescent light bulbs and, instead, install LED light bulbs and light fixtures.
LEDs, which stands for light-emitting diode, use less electricity than incandescent bulbs because they work off electrical currents rather than heat to produce light. LED light bulbs have a longer lifespan (more than 10 years) and don’t get as hot as other types of bulbs.
Cost: The average cost of a single LED bulb is $5 for 25,000 hours of use. That’s compared to $1 for an incandescent bulb for just 1,200 hours of use, according to Eartheasy.com. However, it’s estimated a household can save more than $3,600 over 25,000 switching to LED bulbs from incandescent bulbs, the site found.
Replace windows and doors with energy-efficient upgrades
If you have an older home, chances are you have windows and doors that don’t effectively block out heat and cold, which can run up your energy bills. Installing new ENERGY STAR® qualified windows, doors, and skylights can keep your home’s temperature more consistent in the winter and summer. In turn, you’ll use less energy and lower your home’s carbon footprint.
ENERGY STAR products are certified by the U.S. Environmental Protection Agency as having energy-efficiency performance that help consumers save money while protecting the environment. As noted later in this article, you have several mortgage options to help make home improvements and upgrades using ENERGY STAR and other energy-efficient home materials and products.
If you don’t have the money to replace windows and doors, simply resealing around windows with caulk and adding weather stripping to doors can help keep temperatures in your home more comfortable.
Cost: New energy-efficient windows can cost anywhere from $120 to $1,200 each (not including labor fees), depending on the window size and energy-efficiency rating, according to HomeAdvisor.com, a home services marketplace. ENERGY STAR qualified doors can cost as little as $200 and up to as much as $4,000, depending on the size and material of the door, according to listings on Home Depot’s website.
Invest in ENERGY STAR appliances
Home appliances – washers, dryers, ovens, dishwashers, microwaves, freezers, and refrigerators – eat up about 20% of a home’s monthly electric bill. Switching out old appliances for newer ENERGY STAR models might help you save money over the long run by reducing energy and water usage.
ENERGY STAR appliances use 10% to 50% less energy annually than appliances that are not energy efficient, according to EnergySage.com, a consumer marketplace that matches homeowners and energy-efficient home services providers.
Cost: ENERGY STAR appliances vary in cost, depending on the appliance type, size, and features. Today, the pricing of ENERGY STAR appliances is comparable to non-energy-efficient models due to their popularity.
Install solar roof panels
Installing solar roof panels may help lower your energy bill and reduce your carbon footprint. Solar panels use the UV rays from the sun to create renewable energy for your home. This makes it an eco-friendly upgrade that will pay off in the long run with significant energy savings.
Not only will you have a renewable source of electricity, but you’ll also reap some financial benefits from installing solar panels. Many local utility companies offer discounts and/or credits to customers who install solar panels. Additionally, the Internal Revenue Service (IRS) offers a federal solar tax credit of 26% for systems installed from 2020 to 2022 and 22% for those installed in 2023.
Cost: On average, solar panels cost about $20,000 to install (materials and labor), according to EnergySage.com. Pricing depends on the size and location of your home.
How to pay for eco-friendly home upgrades
Looking to make eco-friendly home improvements but not sure how to pay for it? Finance of America Mortgage can help.
We offer three mortgage products to help borrowers finance eco-friendly home improvements: the Fannie Mae HomeStyle® Energy Mortgage, the FHA Energy Efficient Mortgage, and our own proprietary Jumbo Easy Green mortgage.
Here’s a closer look at each loan program:
HomeStyle Energy loan
HomeStyle Energy loans can be used to buy or refinance a home with conventional financing to make energy-efficient upgrades to a home. For example, the HomeStyle Energy loan can help cover the cost of solar panel installation, upgrading your water system, purchase new doors and windows, and to fortify your home against damage from natural disasters.
You can also use HomeStyle Energy to refinance your existing home loan and pay off other debt related to energy-efficient upgrades on your home. HomeStyle Energy can be bundled with two other Fannie Mae loans: the HomeStyle® Renovation loan and the HomeReady® loan.
Both HomeStyle loans can be combined for benefits such as a pricing credit and energy report waiver for weatherization upgrades in addition to paying for additional renovation projects. The HomeReady loan is a low-down-payment mortgage option with lower rates and cancellable private mortgage insurance (PMI).
FHA Energy Efficient Mortgage (EEM) program
Insured by the Federal Housing Administration (FHA), the Energy Efficient Mortgage program helps borrowers pay for improvements to existing homes that will help the borrowers recoup the cost of improvement through energy bill savings.
The EEM can also be used to purchase a new-construction home. In both cases, a home energy assessment by a qualified energy professional is required in order to be approved for the EEM program. Borrowers can add the cost of a qualifying energy improvement package to their regularly FHA loan amount, provided:
- Improvements are cost-effective based on the home energy assessment or
- Improvements are the lesser of 5% of the home’s adjusted value; 115% of the median single-family home price in an area; or 150% of the national conforming loan limit.
Additionally, the FHA has a weatherization policy that allows borrowers to finance up to $3,500 in basic weatherization costs, such as insulation or thermostats.
Finance of America Mortgage’s Jumbo Easy Green loan
Finance of America Mortgage’s Jumbo Easy Green loan is a jumbo loan geared toward homes with existing solar and geo-thermal heating and cooling systems. Jumbo loans are for loan amounts that exceed area conforming loan limits set by the federal government. FAM’s Jumbo Easy Green has a loan limit of up to $2 million.
Need guidance on mortgage solutions for eco-friendly home improvements? Contact a local Finance of America Mortgage Advisor today to explore your options.