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.
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?
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.