Other than energy-efficient mortgages (which I understand are still only lightly used), what types of financing mechanisms do most homeowners use to pay for home-energy retrofits -- particularly now that most of the Recovery Act energy tax credits have ended or been pared back? 

We'll be writing about this in daily5Remodel next week, so please let me know if you do NOT wish to be quoted. Really appreciate hearing from home-energy pros about how they help their clients pay for energy upgrades.

Thanks!

 

leah@daily5Remodel.com

Tags: daily5Remodel, efficient, energy, financing, mortgages, rebates, remodeling, stimulus

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One of the potentially effective solution -- PACE (Property Assessed Clean Energy) -- has been hamstrung by Fannie Mae and Freddie Mac. PACE is a special assessment on property tax that allows homeowners to pay back energy upgrades over time, ideally in "pace" with the money they save monthly through their newly energy efficient homes. Staring at a glut of present and future foreclosed properties, the mortgage banks don't want any of these special liens that will later make it more difficult to sell the homes.

 

The question of how homeowners are paying for home-energy retrofits is also regionally specific, with varying degrees of State subsidies, but in generally there are options related to Energy Efficiency Mortgages (EEMs), which are increases to the existing loans with no re-qualifications, and 203K Renovation Loans, which help consolidate both home purchase and energy improvements.

 

Also regionally specific are the rebates offered by local utilities, which run the gamut of weak to aggressive. Bottom line, we have to figure out the financing model to gain traction on a critical piece of our country's energy puzzle: improving the energy performance of existing homes. Anyone?

In Kansas the KS Energy Office runs a revolving loan program called Efficiency Kansas.  It works for homeowners, landlord/tenants, and small commercial (defined as using residential style HVAC).  Loan amount is 20K, totally based on Savings of improvements.  The required software is REM. Access is via an Energy Auditor.  The SEO maintains a list of approved qualified auditors.  Training, check offs and CE are required. This is a Test In - Test Out program.
It would be interesting to hear from folks how often payment is made by cash versus credit/debt.  Understandably, vendors can't always tell, e.g., if a check is written on a home equityline it would just look like a "cash" payment.  Important obviously for how cost-benefit proposition is made (e.g., "payback" versus "cashflow").
Some pay with a check, some with a credit card. Also, some of the EMC's around Atlanta offer special financing programs that range from 0% for 36 months up to $3k. They also offer up to $20k @ 7% (length based on amount) and the payments are added to your utility bill. Contractors must be from an approved list and they are paid at closing once the improvements are completed.
In Virginia in the Hampton Roads area, we have a new program starting from the Green Jobs Alliance.  They got stimulus money and started the  Next Step Program to increase energy efficiency of homes in the area as well as create jobs in the construction industry.  They will pay for the audit and pay for 25% of the work done.  The homeowner has to agree to contract to do the work in order to get the audit paid for.  It is in the pilot phase right now.  Working on doing 5000 homes.

Today, with the news that appraisers are being trained to incorporate the building's performance into determining its financial value, prudent home owners can borrow against the home's equity for funding energy efficiency improvements with the expectations of having these improvements reflected in increased value, IMO.  http://jimbushart.realmatcher.com/2011/01/28/appraisers-being-train...

 

NOT FOR QUOTATION: Financing varies with market segment. We see evidence of overwhelming reliance on no-interest or deferred interest revolving credit (credit cards) in the 5% or so of the Do-It-For-Me and DIY markets served by large retailers. Many home-performance programs offer their own financing, but there is relatively modest uptake, and there is anecdotal evidence that customers participating in those programs are drawing on HELOCs and no/deferred-interest cards for the rest. Private contractors not relying on programs are offering interest-rate buydowns that often are not revealed to the customer explicitly, i.e. they think they're getting a 9% loan but it's really bought down (expensively) from a 15% Fannie Mae loan.

In the past, there's also substantial evidence that refis supplied financing for somewhere around 10-14% of home improvements, presumably including those that are energy related.

The new PowerSaver loans from FHA bear watching - due out within the quarter or so.

Suggest that the real question is not so much what people do today for financing - with affluent households accounting for most home energy upgrades - but what will work for moderate-income households for which there is virtually no track record on financing home energy improvements. This is virgin territory.

 

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