This article was originally published in the July/August 1999 issue of Home Energy Magazine. Some formatting inconsistencies may be evident in older archive content.


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Home Energy Magazine Online July/August 1999

in energy

Easy Mortgages with 
Energy Rated Homes of Vermont

Interested in a mortgage for energy-efficient home improvements, but bewildered by the process? If you live in Vermont, you're in luck. Energy Rated Homes of Vermont (ERH-VT) has set up a one-stop service to streamline the approval of energy improvement mortgages (EIMs). This mortgage type allows homeowners to bundle financing for cost-effective, energy-efficient home improvements into a home mortgage loan.

In order to qualify for an EIM, an independent energy rating must be performed on the house to determine which efficiency improvements would generate cost savings greater than the increase in mortgage loan payments from financing the improvement. ERH-VT not only provides an initial home energy rating for its customers, but also gets contractor bids for the needed home improvements, makes sure the work gets finished in a timely manner, and conducts a postimprovement energy rating.

ERH-VT started offering this service for free early last year under a U.S. Department of Energy grant. So far, 20 homeowners have acquired EIMs with ERH-VT's help. But that help is no longer available for free. What we are seeing is that people are willing to pay what it costs to deliver the service, says Richard Faesy, development director for ERH-VT. Their $800 charge covers the two home energy ratings, obtaining the contractor bids, overseeing the contractor's work, and preparing documents needed to secure the EIM. Diagnostic tests using a blower door are included in the rating process.

At first glance, this fee may seem steep. However, Faesy says, ERH-VT can almost always identify home improvements that will yield large enough energy cost savings to offset both the cost of the improvements and the fee (which amounts to about $6/month). There are opportunities for energy savings in almost every house that is more than 20 years old, says Faesy. ERH-VT emphasizes the reliability of its energy cost savings predictions with a guarantee. Included in the postimprovement rating is an estimate of the customer's new energy use for space heating, water heating, lighting, and applicances. If the new homeowner's space heating consumption exceeds the predicted value by more than 25%, ERH-VT will pay the difference. We've never had to pay any difference yet, says Faesy.

Since EIMs are not well-known products, finding a lender willing to work with this type of loan can be difficult--but not for ERH-VT. Most of its customers have been referred to him by a lender. Our typical customer is someone who wants to buy a 120-year-old farmhouse, but there's no insulation in the walls and the heating system is electric. This customer may want the house but be unable to afford it unless the energy-related problems are solved. Not all banks have been willing to offer EIMs, but they may if they perceive that otherwise they will lose a deal.

Satisfying lender requirements can be a difficult enough hurdle for some new homeowners. Finding competent contractors to solve home performance problems can make even experienced homeowners weep. Since ERH-VT has been working on building energy efficiency in Vermont for 13 years now, it can locate at least one building performance contractor in every area of the state. When homeowners can get guaranteed energy efficiency improvements professionally installed by a set date, and the costs of those improvements are bundled into a mortgage payment, even at $800, ERH-VT's services are a sweet deal.

--Mary James



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