Energy Improvement Mortgage

DEFINITION of 'Energy Improvement Mortgage'

A mortgage that sets money aside for home improvements that will increase energy efficiency within the home. Energy improvement mortgages are available when a house is being purchased or refinanced. A certified home energy rater will examine the home and suggest improvements; once the improvements have been made and confirmed, the lender will repay the expenses (which have already been approved under the mortgage contract) to the borrower from an escrow account.

BREAKING DOWN 'Energy Improvement Mortgage'

Borrowers will carry a higher mortgage payment with an energy improvement mortgage, but the additional cost may be balanced out or even erased by lower ongoing energy costs, as the home will be more efficient once the improvements have been made. Typical improvements that are considered include extra insulation, tightening of window and door seals and replacement of the HVAC system.

It is in the best interests of mortgage lenders to make homes more energy efficient, as this lowers homeowners' monthly costs, improving their chances of being able to service the mortgage. Energy efficient homes also retain more of their value at resale and are attractive to a wide group of potential buyers.

As energy efficiency ratings for homes become more commonplace in the industry, more lenders will be attuned to offering energy improvement mortgages, appealing to both the bottom line and the social/environmental concerns of their customers.

RELATED TERMS
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against ...
  2. Home Mortgage

    A loan given by a bank, mortgage company or other financial institution ...
  3. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  4. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  5. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  6. Purchase Mortgage Market

    A mortgage market for home financing transactions. The primary ...
Related Articles
  1. Options & Futures

    Green Mortgages Save Money And The Environment

    This emerging type of loan is not just for treehuggers. It rewards you for eco-friendly housing, in the form of cold, hard, cash.
  2. Taxes

    3. Home Energy Efficiency Improvements

    Tax deductions and credits aren't just for big companies. You might be surprised how many tax breaks apply to your return.
  3. Products and Investments

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
  4. Credit & Loans

    5 Signs a Reverse Mortgage Is a Bad Idea

    Here are the key situations when you should probably pass on this type of home loan.
  5. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  6. Home & Auto

    Comparing Reverse Mortgages vs. Forward Mortgages

    Which one a homeowner chooses depends on where you are at this point in your life, personally and financially.
  7. Credit & Loans

    Guidelines for FHA Reverse Mortgages

    FHA guidelines protect borrowers from major mistakes, prevent lenders from taking advantage of borrowers and encourage lenders to offer reverse mortgages.
  8. Wealth Management

    The Most Important Factors that Affect Mortgage Rates

    Discover what the most important factors are that affect mortgage interest rates. Factors range from inflation and economic growth to Federal Reserve activity, .
  9. Home & Auto

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  10. Professionals

    Mortgage Financing 2

    Mortgage Financing 2
RELATED FAQS
  1. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
  2. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  3. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
  4. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  5. If my mortgage lender goes bankrupt, do I still have to pay my mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Sorry to disappoint, but there ... Read Answer >>
  6. Is it a good idea to add a reverse mortgage to your retirement strategy?

    A reverse mortgage can be a great way to increase retirement income. Does it work for everyone? What happens after a homeowner ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center