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Tax credits for residential energy efficiency expired at the end of 2021, but there are still cost-saving reasons to make green home improvements — and ways to finance them, too.
“You can save money and the environment at the same time by installing energy and water saving features in your home,” says Tabitha Mazzara, director of operations at mortgage lender MBANC. “Business owners and homeowners are turning to financing options like green loans or energy efficient mortgages so they can make eco-friendly and energy-saving improvements while saving money on their utility bills every month.”
If you want to make green upgrades to your home and don’t have the cash, you might be able to get an energy efficient mortgage (EEM) or a green loan to help you fund energy efficient improvements.
Here’s what you need to know about these two different financing tools, the similarities and differences, and how to get them.
Green Loan vs. Energy Efficient Mortgage: Main Differences
The terms “green loan” and “EEM” are often used interchangeably, according to Jacob Channel, senior economic analyst at LendingTree. The term “green loan” is a way for lenders — including auto loan lenders and mortgage lenders — to simplify the umbrella category of green savings, he says.
However, it’s important to know the distinctions:
A green loan is a type of personal loan, which can be unsecured in some cases (meaning you don’t need collateral). “Green loans are usually most used for one-time, climate-friendly home improvement projects like weatherization, solar panel installation, or even a kitchen renovation that uses sustainable materials and appliances,” says Mazzara.
Energy Efficient Mortgage
“An energy-efficient mortgage is a home loan that’s used to buy an existing home that meets energy-efficiency standards or to improve a home you already own.” Like a regular mortgage, an EEM is secured by your home. If you can’t make payments on the mortgage, you could potentially lose the house.
Green Loans and Energy Efficient Mortgages (EEM) Vs. Traditional Loans: Pros and Cons
One of the biggest pros of both green loans and EEMs is that you can reduce your negative impact on the environment and live more sustainably. On top of that, both of these loans have the potential to help you reap utility savings that can offset the cost of the loan over time and …….