May 25, 2018

Bill Would Help Finance Green Home Purchases

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Bill Would Help Finance Green Home Purchases

A Senate bill reintroduced this week seeks to increase green home purchases by proposing that those who buy energy efficient homes qualify for larger mortgages than their incomes would normally allow.  

“The measure would allow lenders to include projected energy savings from efficiency upgrades when measuring the borrower’s income against expenses and the value of the home against the debt,” The New York Times reports. “In addition to giving borrowers larger loans in new purchases and refinancings, it could also lower their interest rates.” The proposed legislation only applies to loans that are guaranteed by federal agencies, which back about 90 percent of new mortgages.

Sen. Johnny Isakson, R-Ga.—who worked in the real estate industry for 33 years prior to joining Congress—introduced the bill, along with Sen. Michael Bennet, D-Colo. The senators introduced the bill in 2011, but it failed to gain approval despite receiving widespread support at the time.

By lessening the amount of energy a home uses, it increases “the amount of dollars in the pockets of home owners,” Isakson says. 

A household’s average energy costs can amount to more than $70,000 over the life of a 30-year loan, according to Bennet’s office. That’s more than real estate taxes and insurance payments, which are taken into account during the underwriting process, Bennet’s office notes. Energy-efficient upgrades have been shown to reduce the average home’s utility bills by at least 30 percent. 

“Really we’re just talking about disclosure here,” Sean Babington, legislative counsel on energy for Senator Bennet, told The New York Times. “For years you’ve had to disclose if there are termites in your house or if you have radon gas in your basement. You bring an inspector out to make sure the foundation’s not cracked. Here we have something that probably over the life of the home costs the home owner orders of magnitude more than all those problems, and we totally ignore it.”

Source: “Bill Would Sweeten Loans for Energy-Efficient Homes,” The New York Times (June 6, 2013)

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