HomeStyle Energy Mortgage Program

By Brad Yzermans on June 25, 2016 in Mortgage Programs

The Fannie Mae Homestyle® Energy Mortgage is a new energy improvement mortgage program designed to help borrowers pay off existing high rate energy improvement loan debt (like HERO, Ygrene, CaliforniaFIRST PACE loans) and make new energy improvements more affordable and easier to finance.

HomeStyle Energy loan (or PACE Buster loan) can also be used when buying or refinancing a home to purchase new solar (or other energy efficient improvements) after the mortgage loan has closed by allowing up to 15 percent of the “as completed” home value to pay for the cost of upgrades.

The HomeStyle® Energy loan is a GAME CHANGER for the energy improvement industry because HomeStyle Energy financing provides the lowest cost of ownership for solar energy on the market today. – EnergySenseFinance.com

Why is HomeStyle Energy Loan a Game Changer?

For most people, when it comes to solar and other energy efficient improvements, it all boils down to the cost of of ownership and return on investment.

Most solar financing or green energy efficient financing options require homeowners take out a higher interest rate 2nd mortgage like a home equity loan/line of credit, higher rate unsecured loan (credit card), or a rate Property Assessed Clean Energy (PACE) loan like the Home Energy Renovation Opportunity loan (HERO).

Because the HomeStyle® Energy Mortgage Program typically provides lower interest rates and payments than traditional forms of energy efficient financing, it provides a lower cost of ownership and homeowners get a faster/higher return on their investment than traditional forms of home improvement financing.

For example ==> compared to doing a regular cash out refinance to purchase or payoff existing energy improvement debt (PACE, HERO, or other unsecured debt), the interest rate would be lower with HomeStyle than using a traditional cash out refinance loan program. HomeStyle doesn’t penalize borrowers with costly LLPA fees normally charged on a cash out refinance.

How to use the HomeStyle® Energy Mortgage

1. Pay Off Existing High Interest Rate HERO or PACE Debt

The Homestyle Energy loan was designed to give home owners more affordable financing option and pay off existing Property Assesses Clean Energy (PACE) loans in California (like the HERO Program.

It’s been well documented by the media and numerous people here, here, here, here, and here that the HERO Program and other PACE energy and renovation financing is causing people to SIGNIFINCANTLY OVERPAY for their energy renovation improvements.

Payment on a PACE loan or HERO program, payment is collected through property tax assessments, which places a heavy burden and financial hardship on homeowners due to financing the higher interest rate debt over a 5-20 year period. The PACE or HERO program can double a homeowners monthly property tax payment!!!

The PACE/HERO subordinate 2nd lien restricts and complicates the refinancing or sale of a home. Paying off your HERO or PACE loan will improve your homes marketability and make it easier to sell or refinance in the future….not to mention save you money.

HomeLoanArtist Pro Tip ==> Homestyle Energy will also payoff non-HERO/PACE unsecured consumer debt and equity loans if you can document the debt was used solely for the purchase of eligible energy improvements.

2. Finance New Energy Improvements when Buying or Refinancing

GO BIG and finance up to 15% of the as-completed appraised property value of the home at the timeof purchase or refinancing.

For example, if the home you are buying appraises at $350,000, and the energy upgrades (like solar panels) are expected to add $20,000 of value (determined by a licensed appraiser), you could finance up to $55,500 for new solar ($370,000 x 15%).

This amount would more than cover the purchase and installation of your energy saving products.

3. Easily Finance up to $3,500 in Weatherization or Water Improvements

Easy peasy…..no costly or complicated energy report to prove the improvements will make your home more energy or water efficient is needed.

HomeStyle® Energy Features

Finance up to 95% loan-to-value (LTV) of the as-completed appraised value
HomeStyle Energy can be used with any Fannie Mae loan product, including the HomeReady Mortgage
Energy upgrades must be completed with-in 180 days of the mortgage note
1 to 4-unit existing properties (no new construction or manufactured homes)
Conforming & high balance loan amounts
All occupancy types
Energy rating report may be required (see FAQ’s below)

Don’t see your energy efficient or water improvement on this list? Call or contact me here to ask if it can be financed with the HomeStyle Energy program.

HomeStyle Energy Frequently Asked Questions:

Q. Can I refinance my FHA or VA loan without having to pay off my HERO loan?

Yes, FHA and VA now allows HERO loans/lines to remain on title so homeowenrs can do either a rate and term refinanc eor take cash out! They even allow FHA and VA buyers to assume the selers HERO loan when buying a home. You can read details here.

Q. What types of energy improvements will HomeStyle Energy allow?

Common Energy Improvements Include:

Solar Panels
Windows and Doors
Duct sealing and replacement
High efficiency furnaces and air conditioners
Weather-stripping and caulking to seal air gaps
Attic & wall insulation
Smart thermostats and equipment controls (think Nest)
Low flow irrigation and water devices

Q. Can the HomeStyle Energy Loan be used to pay off or refinance my HERO loan AND finance additional new energy or water improvements?

Absolutely yes! The HomeStyle Energy mortgage program was specifically designed to refinance HERO loans and other PACE high interest rate debt, in addition to financing new energy and water efficient upgrades.

Q. What is the difference between an Energy Improvement Mortgage (EIM) and an Energy Efficient Mortgage (EEM)?

Energy Improvement Mortgage – Finances the purchase of new energy upgrades when buying or refinancing an existing home into the mortgage loan. Can also pay off existing debt that was used to purchase energy efficient improvements.
Energy Efficient Mortgage (EEM) – Uses the energy savings from a new energy efficient product/system to increase the home buying power of consumers and capitalizes the energy savings in the appraisal.

Q. Does HomeStyle Energy Require an Energy Efficiency Report?

A home energy report is used to determine the cost-effectiveness of the energy improvements. Essentially, the report must show the present value of energy savings is greater than the cost to install.

As of Feb, 2018, home energy report is no longer required when financing/paying off certain energy improvements or using funds to payoff other unsecured funds that were used to finance the energy improvements.

A home energy rating report is not required when paying off a PACE or HERO loan.

Compare Options and Get the Facts!

Unsure about how to go about applying for a HomeStyle Energy loan, if an FHA 203K or HomesStyle Renovation loan may be a better option? Wondering if an FHA EEM program may be better? Or perhaps you’re not sure if it’s even worth purchasing solar or other cost saving energy products?

Additional Resources:

energy efficient mortgage, energy improvement, Fannie Mae, HERO loan, homestyle energy, Mortgage, solar energy

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