Energy Improvement Mortgage

AAA

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.

INVESTOPEDIA EXPLAINS '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. Green Tech

    1. Technology that is considered environmentally friendly based ...
  2. Rate And Term Refinance

    The refinancing of an existing mortgage for the purpose of changing ...
  3. Mortgage Originator

    An institution or individual that works with a borrower to complete ...
  4. Conventional Mortgage

    A type of mortgage in which the underlying terms and conditions ...
  5. FHA Loan

    A mortgage issued by federally qualified lenders and insured ...
  6. Mobile First Strategy

    Mobile first strategy is trend in website development where designing ...
RELATED FAQS
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... Read Full Answer >>
Related Articles
  1. Personal Finance

    10 Ways To Save Energy And Money

    The average family spends $1,600/year on utility bills - find out how to put some of that back in your wallet.
  2. Investing

    Clean Or Green Technology Investing

    Innovations in energy and consumption grow as companies adopt them to reduce costs.
  3. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  4. 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.
  5. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  6. Personal Finance

    Building Green For Your House And Wallet

    The earth-smart money is on these environmentally friendly housing projects.
  7. Personal Finance

    6 Ways To Save On Your Utility Bill

    Find out how to reduce your costs with these inexpensive tips.
  8. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  9. Credit & Loans

    Calculating Interest Expense

    Interest expense is the cost of borrowing money.
  10. Economics

    What are Deliverables?

    Deliverables is a project management term describing an object or function that must be provided or completed by a certain due date.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!