Do you want to help protect the environment and decrease the size of your carbon footprint by reducing your household’s energy consumption? Or perhaps you would like to keep a little more green in your pocket by reducing your energy bills? With a VA Energy-Efficient Mortgage, you can accomplish both of these goals.
Exploring the Benefits of a VA Energy-Efficient Mortgage
According to the U.S. Department of Energy’s Energy Saver, the right improvement can make a major difference in the amount of energy you use. For example, installing low-E storm windows can reduce your heating and cooling bill by more than 30 percent. Simply sealing uncontrolled air leaks can reduce your annual heating and cooling bill up to 20 percent. Insulating your water heater tank has the potential to cut your bill for water heating by 16 percent, and insulating hot water pipes can reduce it by another 4 percent. If you would like to improve the energy efficiency of your home, but you lack the cash to do so, a VA Energy-Efficient Mortgage might be the perfect choice.
What Are VA Energy-Efficient Mortgages?
As their name suggests, VA Energy-Efficient Mortgages, which are sometimes referred to as VA EEMs, are loans made to finance energy-efficient repairs and improvements. They can be included when you’re using a VA Home Loan to purchase a home or when you’re refinancing your existing mortgage with a VA refinancing loan secured by the dwelling.
How Much Can You Borrow with a VA EEM?
With a VA EEM, the cost of the energy-efficient improvements is rolled into your total loan balance and repaid as part of your monthly loan payment. How much can you borrow for these improvements? As the VA explains, that depends. Because the reduction in energy costs will generally offset the increase in the monthly mortgage payment, the mortgage amount can be increased by up to $3000 based solely on documented costs for improvements that are deemed reasonable for the property. If the mortgage is to be increased by between $3000 and $6000, then the lender must determine that the resulting increase in the monthly mortgage payment will not be more than the likely reduction in monthly energy bills. What if more than $6000 in improvements are planned? The amount of the EEM can be increased with the VA’s approval if it is supported by an increased property valuation that matches the desired loan amount. Again, the lender is expected to verify that the increase in the mortgage payment is within the borrower’s means and will be offset by the potential reduction of their energy bills.
What Can You Do with a VA EEM?
Will the renovations that you’re planning reduce your home’s monthly energy bills? If so, there’s a good chance that you can use a VA EEM to fund them. The VA’s guidelines offer several possible improvements that would be acceptable:
- Adding new or additional insulation in the attic, floors, ceilings, and walls
- Installing new or additional water heater insulation
- Installing clock thermostats
- Adding caulking and weather-stripping
- Installing vapor barriers
- Installing or upgrading storm windows and doors, including thermal windows and doors
- Adding or replacing a heat pump
- Adding solar heating and cooling systems
- Installing solar heating systems, including ones for heating water for domestic use
- Performing specific furnace modifications to improve the system’s efficiency
How Are VA EEM Monies Utilized?
VA EEM monies can be used to fund renovations completed by a contractor or by the homeowner, but timing is an important factor. The work must be completed within a specific window of time. According to The Mortgage Reports, borrowers who complete their project before closing on their purchase or refinance will need to provide receipts for the work and demonstrate that it was completed within the last 90 days. What if the work is completed after closing? In that situation, the lender places the money in an escrow account and releases it only when provided with proof of a project’s completion. To secure reimbursement, the projects must be completed within six months of closing. Any funds remaining in the account at the end of the six-month period will be applied to the loan’s principal balance.
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At PrimeLending: Manhattan, Kansas, it is our pleasure to assist service members, veterans, and other eligible people in taking full advantage of their VA loan benefits. Whether you are interested in purchasing your first home, transitioning to a new property, refinancing the mortgage on your existing property, or improving your home with a VA Energy-Efficient Mortgage, we’re ready to serve you. Let us show you how to get the most out of the benefits you’ve earned. When you’re ready to explore the possibilities, call us at 785-560-3011 or contact us online.
