Banks need to get the green mortgage picture
By Chris LaPointe, Pacific Pro Realty
Chris LaPointe is principal broker for Pacific Pro Realty.
What is the payback period for alternative energy? I hear from the industry that it's 15 years or more. I disagree.
For example, if you were to install a photovoltaic system, with a solar hot water system, on your home and finance the cost into your mortgage your savings would be immediate. A $20,000 system added to a 30-year mortgage at 3.75 percent interest would add $92.62 a month to your mortgage payment.
If your conventional utility bills average $200 per month and if a green system is providing one half of your total energy consumption, you now only have to pay $100 each month for conventional utility usage. Your green system is only costing you $92.62 per month so you are immediately saving $7.38 each month. As conventional utility prices continue to rise your savings each month will increase.
Conventional Federal Housing Administration and other home mortgages, with the exception of Veterans Administration loans, do not look at utility costs when figuring a buyer's debt-to-income ratio. By allowing lenders to take the utility savings into account when qualifying a borrower, they could increase the loan amount by including the green system would offset their monthly utility bill.
The rub for lenders, buyers and sellers comes in the form of the appraisal. Banks aren't going to lend more on a home than the level for which it appraised. Appraisers already have the “Residential Green Energy and Efficient Addendum” at their disposal but few use it, let along know it exists. As a result, they may not know how to determine the true value the green system adds to the property.
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