Mortgages can help home's energy efficiency

Here's a new twist on your average mortgage: How about an energy-efficient mortgage?

No, it doesn't mean less paperwork and or less red tape.

It's a mortgage - created by Fannie Mae - that will help improve the energy efficiency of your new home.

This type of mortgage was closed in November for the first time in Michigan by Lansing-based Priority Mortgage Corp.

Here's how it works: Once a home buyer is pre-qualified for a mortgage, the chosen home goes through an energy audit to determine its energy efficiency and pinpoint problem areas.

Then buyers are allowed to essentially borrow against the appraised value of the home to make energy updates - replace windows and doors, heating and cooling systems, hot water heaters, appliances and more.

The funds for improvements are placed in escrow and rolled into the mortgage when the work is done.

The amount that homeowners can borrow to make improvements is based on 15 percent of the appraised value.

In a statement, Indigo loan officer Joel Wiese said the benefits are three-fold:

• Utility costs are lower.
• The value of the home may be increased.
• There's a significant environmental impact.

Indigo said the homeowner who recently closed this type of loan will save $740 a year in utility costs and will reduce their monthly mortgage payment by $60.

An energy-efficient mortgage can be done for a new home purchase or a refinance.

But the energy projects are not for "do-it-yourselfers," Wiese cautions.

Lenders require a signed guarantee that costs will not spiral out of control.