Bank offers lending help for energy efficiency

Wood & Huston Bank began offering energy-efficient mortgages in November. The energy efficient mortgage, or EEM program, allows customers to get more house for their money, according to Wood & Huston mortgage lender Rhonda Holaday.

“All government loans have a break on how much you can borrow and what your debt ratio can be,” Holaday said. “But because of the energy efficiency of these homes, you're allowed to have a higher debt ratio, so now you qualify for maybe a little bit more expensive home.”

Holaday said the program can allow potential homeowners to qualify for a home loan as much as 5 percent higher than normal, if the home they're buying meets the Environmental Protection Agency guidelines for an energy-efficient home.

“Let's say you want to buy a $200,000 house and your ratio will only let you buy $190,000,” she said. “Because you're buying energy-efficient, it's assumed that you'll have such a savings in your energy costs that you can afford a more expensive home.”

Potential buyers also must have 3 percent of the home's total cost in cash to apply to the purchase.

The cost of energy-efficiency home renovations, assuming they are cost-effective, also can be recovered through the use of an escrow account, if the energy improvements are installed after the loan closes.

Energy bills aren't the only place where residents can see savings.

The Energy Tax Incentives Act of 2005 offers tax credits for homeowners who make energy-efficient improvements to their homes.

A lifetime credit of up to $500 is available for energy-efficient home improvements made in 2006 or 2007, according to James Lewis, accountant with Kirkpatrick, Phillips & Miller, CPAs, PC. The credit is 10 percent of the cost of the improvements, provided that renovations are expected to last at least five years.

Lewis said that the tax credits, while helpful, are not going to make a huge dent in costs.

“The media has made these credits out to be a huge tax savings opportunity, but in reality, they aren't that big of a deal,” Lewis said. “Probably the more important part of the act is the new credit for hybrid motor vehicles. Those credits can be more significant then the residential credits.”

Lance Wright is president of Homewright Construction Inc., which, according to the Energy Star Web site, www.energystar.gov, is one of two companies in Springfield that builds homes that meet the EPA Energy Star standards. The other company is Lloyd Built Homes LLC.

Wright said the program also offers incentive for builders, who can encounter costs for building energy-efficient homes that are $3,000-$5,000 higher than standard construction cost.

“Quite often members of the building community say if you put all of these extra things on, people aren't going to be able to afford the houses,” Wright said. “The program is set up so that if you otherwise qualified for the home, the energy efficient loan allows for $4,000 to $8,000 more because the house is certified. It's pretty much a slam dunk that your bills will be lower - 30 or 40 percent lower in some cases - for your utilities.”

Energy-Efficient

Mortgage Eligibility

o The cost of energy-efficient improvements eligible for financing into the mortgage is 5 percent of the value of the home, with a minimum of $4,000 and a maximum of $8,000.

o If the energy improvements are installed after the loan closes, the lender places reimbursement money in an escrow account, released to the borrower after the improvements are completed.

Tax Credits

o Owners of existing homes are entitled to a lifetime credit of up to $500 for home improvements in 2006 and 2007, as long as the home is the taxpayer's primary residence.

o A tax credit is also available for residential alternative energy expenses. The credit can be up to 30 percent of the cost of solar water heaters, electricity equipment and fuel cells, up to $2,000 a year.

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