Green mortgages save on energy, loan costs

The HERS inspection takes into account the home's the insulation, appliances and windows, as well as the local climate and area utility rates. The resulting report includes the overall rating score -- from 1 to a top score of 100 -- for the house in its current condition.

It also gives recommended upgrades, estimates of the cost, the annual savings, the useful life of the upgrades and your rating score after the recommended improvements are installed. To qualify for a green mortgage, the HERS report must indicate that completing the process will save money on your utility bill.

The cost of a HERS inspection and rating usually runs from $100 to $300, according to the Federal Citizen Information Center in Pueblo , Colo. In some cases, the seller, lender or real estate agent may pay this cost, or it may be financed as part of your mortgage.

Doris Ikle, owner of CMC Energy Services in Bethesda, Md., says her energy auditors can complete an inspection and deliver a report in one day.

"The energy inspectors take pictures inside the house and describe each of their recommendations very specifically," says Ikle. "The numbers we give are based on the estimated costs from the R.S. Means book, which is sort of like the (Kelley) Blue Book for repairs."

Will Mounts purchased his West Hills, Calif., home in January 2009 with an FHA-backed, energy-efficient mortgage processed by the Modern Earth brokerage, which handled the arrangements for the HERS inspection and got bids from contractors.

The inspector's report included a recommendation of the three most cost-effective changes he could make to the house: installing attic insulation, sealing the air ducts and installing dual-paned windows.

Modern Earth solicited bids from contractors. Making the upgrades cost Mounts $10,895, including the cost of the HERS inspection and the management fee from Modern Earth. It also added $46 per  month to Mount's house note. Based on his HERS report, he expects to save about $1,000 per year on energy costs.

Because of the cost-efficiency requirement, Mount says the contractors had incentive to bring their prices down. He says that when he tried pricing the job on his own, he got quotes of around $10,000 for the new windows alone. By getting the home improvements done through a green-mortgage program, he was able to get the windows for around $5,000.

Although the energy consortium's Wolfe laments the current low level of lenders offering green mortgages, he has noticed more banks talking about them. "I think that's kind of encouraging."


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