Financing Options: Make Your Home Green When You Buy (or Sell) It

Image Credit: Adrian Smith/Gordon Gill Architecture

While money and monthly budgets are often tight when buying or selling a home, there are also one-time opportunities available to finance significant upgrades to the property and make your home a greener residence. Whether it’s new insulation and weather-stripping, solar roof panels or solar water heater, geothermal, xeriscaping, or some other green investment, be sure to seriously consider any upgrade you may want to make before settling on the terms of the sale and finalizing the loan terms.

 

  1. Home loan add-ons: So long as you know what green-minded updates you want for the home, the best way to finance them is typically with the home mortgage itself. You will avoid the logistical hassles of having the updates installed after you’ve already moved in. You will avoid the uncertainty and headaches of financing or saving up for the green remodel. You will be able to finance the remodel with a fixed rate loan without incurring new closing costs. In other words, dollar-for-dollar, it can make a lot of sense to finance a green investment with favorable loan terms. This can be true even if you’re not making a significant down payment and financing a remodel without equity in the home.
  2. Downsizing into a green home. Empty-nesters are the most common example, but a lot of people are looking to downsize. Whether you’re a buyer and a seller, or you’re just moving into a smaller residence, think about finding a greener, more energy-efficient home with your next place. Part of this downsizing decision may be a smaller, more easily managed mortgage, but it can also be a nicer place per square foot with modern eco-friendly amenities and self-cleaning features. The ideal property for a young family with 4-5 members is usually a lot different than it is for a couple who’s planning for retirement within the next decade.
  3. Flat-fee real estate commissions. One of the things that has traditionally cut against the idea of making significant investments when buying a home is the 6% bite that comes out of the home equity by paying realtor commissions. More and more, there are alternative options for buyers and sellers that use flat fee real estate commissions or even sale by owner properties that can save homeowners ten-thousand dollars or more. This leaves more room in the budget to make a green investment in your new home.
  4. Make your existing home green. While there are unique opportunities that come with green remodels and new home sales, people aren’t moving as frequently as they used to. Moreover, there is now a sizable chunk of homeowners who enjoy incredibly favorable loan terms, especially as interest rates are poised to rise in future years. Here’s a great feature story we ran across about a homeowner who wanted to fund a home remodeling project. So that the original home loan terms were preserved, the homeowner sought out alternative options to refinancing the mortgage.

 

The larger point is that there are a handful of common ways to finance a green-minded remodel. These options can be a better or worse fit depending on your individual circumstances. Just don’t prematurely dismiss the idea of making a significant green investment while in the process of buying or selling a home.