If you want to make energy efficient changes to your home but don’t have the cash to do so, you may benefit from the Fannie Mae HomeStyle Energy Mortgage. This program is meant to help homeowners lower their utility costs or make upgrades to a home’s resiliency to protect against environmental disasters.
Fannie Mae designed this program as an alternative to securing a home equity loan, line of credit or an unsecured loan. You can use it to finance energy efficient changes that cost as much as 15% of the ‘ after completed value’ of the property.
You can use this program on a home purchase or refinance.
How the Fannie Mae HomeStyle Energy Mortgage Works
If you are buying a home, you can add up to 15% of the ‘improved property value’ for energy efficient improvements. For example, if you buy a home that the appraiser says will be worth $200,000, you can borrow an additional $30,000 for energy efficient improvements.
If you are refinancing your existing home, you can add up to 15% of your home’s value to your mortgage. You can borrow this money for energy efficient changes you are about to make or changes you already made. You can pay off energy efficient loans that are on a credit card, unsecured loan, or a second mortgage loan.
The one difference with the refinance is even though it’s called a ‘limited cash-out refinance,’ you are able to pay off any debts used to finance the energy efficiency changes. You must be able to prove the money was used for those purposes in order to use this program though because the limited cash-out refinance has lower interest rates and more flexible guidelines than a full cash-out refinance.
The Benefits of the Fannie Mae HomeStyle Energy Loan
There are many benefits that you receive from the Fannie Mae HomeStyle Energy Loan including:
- You have the ease of having one loan with one payment. You don’t have to juggle several payments and due dates. All expenses are in your first mortgage.
- You only need 3% equity in the home or a 3% down payment if you purchase the home.
- The lender bases the amount you can borrow on the ‘post energy efficient changes value.’ This is unlike any other refinance program that would only allow you to tap into the home’s equity that is already there, even for home improvements.
- You may reduce your energy costs as well as increase your property’s value all with one loan. You might be surprised to see how much even the small energy efficient changes affect your home’s value.
The Fannie Mae HomeStyle Energy Mortgage is a great way to make changes to your home’s energy efficiency. Whether you are trying to save money on your monthly bills or reduce the wear and tear on your utilities, it can be a great way to help you achieve your goals.
The Fannie Mae program has flexible guidelines, competitive interest rates, and low closing costs, making it a viable option for many borrowers that want to improve their home’s energy efficiency.