Two US mortgage authorities, the Federal Housing Administration (FHA) and Fannie Mae, have recently launched new mortgage programmes to help consumers pay for their home energy improvements.
Called PowerSaver, the FHA’s latest programme allows qualified homeowners to borrow as much as US$25,000 at fixed rates between five and seven percent for up to 20 years to finance ventilating and heating systems, high-efficiency doors and windows, solar panels, insulation and duct sealing and geothermal systems.
Though officially a pilot programme, HUD Secretary Shaun Donovan expects 30,000 PowerSaver loans to be finalised in the next two years. It could eventually become a significant national programme for home energy enhancements, with total loans reaching “the millions.”
The main advantage of the PowerSaver programme is its long-term and low fixed interest rate, especially when compared with most homeowners’ alternative options, such as lines of credit and bank home equity loans.
However, some borrowers might come across payment problems, since the programme only allows total household mortgage debt loads of up to 100 percent of market value. If the borrower experience even slight income decreases or property values in the area decline, it will certainly place them in negative equity territory.
Meanwhile, Fannie Mae’s “home energy improvement” mortgage add-on programme is considerably different from FHA’s.
Rather than a separate loan to fund the energy upgrades, Fannie Mae includes the cost of the home energy enhancements in the mortgage amount itself. The loan is capped at up to 10 percent of the estimated market value of the home, following the energy efficiency upgrades.
Therefore, Fannie Mae’s programme, which is now available through some participating lenders in the US, allows consumers to acquire an existing house and enhance its energy usage extensively with one mortgage at current market rates. Most single-family properties are qualified for the programme, except cooperative units and manufactured houses.
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