By The Energy Room

03/13/2012 As Ireland reels from the financial crisis, the word mortgage has become something of a dirty word. Yet developments in the home loan market of the US recently may offer a new direction for property loans with the introduction of the energy efficient mortgage.
Indeed if these are packaged correctly, taking into account unique Irish lending conditions, these could even help alleviate some of the stresses of negative equity and provide a much needed boon to a depressed market.
What is an Energy Mortgage?
An energy mortgage is a mortgage that credits a home’s energy efficiency within the home loan. This could mean giving the home buyer the ability to buy a more valuable property because of the lower monthly costs of heating the home. For homes in which the energy efficiency can be improved, this concept allows the money saved in heating bills to finance energy improvements.
They could even be structured to allow the mortgages of more energy efficient rating homes to be credited for their increased efficiency. Obviously this would require some government determination and the collusion of mortgage providers to function. But if it resulted in less stressful mortgages for energy-aware home owners, as well as a stimulus to a dead sector and a better national performance under the Kyoto Protocol, then why not?
In the US there are two types of Energy Mortgages:

• Energy Improvement Mortgage – Finances the energy upgrades of an existing home in the mortgage loan using monthly energy savings.
• Energy Efficient Mortgage – Uses the energy savings from a new energy efficient home to increase home buying power and capitalises the energy savings in the appraisal.

Increasing Buying Power
For the flagging property industry energy mortgages could be good news. The ability to leverage a home buyer’s investment in energy efficiency increases the number of qualified home buyers and increases their purchasing power. Recent studies by the Environmental Protection Agency (EPA) in the US state that energy efficient mortgages can have a dramatic effect by increasing the market for home ownership. Their analysis found that an average of 6.8% more families would be able to qualify for a home loan through an energy efficient mortgage.
Increasing Property Values
Another US study published in the Appraisal Journal documented that the market value of a home increases $20 for every $1 decrease in annual energy costs. According to recent analysis by the Pacific Northwest National Laboratory, building energy efficient houses can result in annual savings of $170 to $425 per property. These savings could then equate to an increased home valuation of between $4,250 to $10,625.
BERs: The Key to Energy Mortgages
Ireland’s Building Energy Rating (BER) structure would drive an energy mortgage programme. BERs provide a standard measurement of a home’s energy efficiency. Ratings could be used for both new and existing homes. The BER includes all of the information that mortgage providers would need to underwrite an energy mortgage, including a calculation of the monthly energy savings and the present value. Find out more about BERs.