Save on your mortgage while saving energy (© Siri Berting/Getty Images)

One of the best tools for making your dream home more affordable while saving on the cost of power, heating and cooling is the energy-efficient, or “green,” mortgage.

Most energy-efficient mortgage, or EEM, programs let you qualify for bigger loans than you would otherwise by folding in the additional cost of making improvements for energy efficiency or of purchasing an already energy-efficient home. Another version of the green mortgage provides discounts on loan fees or interest rates for homes that are certified as energy-efficient.

Because mortgage interest payments are tax-deductible, an energy-efficient mortgage can be a more cost-effective way to finance home-energy improvements than using a credit card, bank loan or cash, which usually offer no tax benefits.

The Federal Housing Administration, Fannie Mae and the U.S. Department of Veteran Affairs each have some version of a green mortgage. Freddie Mac, while having no formal energy-efficient mortgage program, allows lenders to take the projected utility savings from home upgrades into account when setting the loan amount.

Qualifying for a green mortgage
There are two ways a home can qualify for a green mortgage. For existing homes, you’ll need energy-saving improvements verified by a Home Energy Rating System, or HERS, report, following an inspection by a certified home-energy rater. To find one in your area, go to the Web site of the Residential Energy Services Network, click on “Home Energy Ratings” and then select “Find a Certified Rater.” For new constructions, a builder must certify that home meets energy-efficiency guidelines. If you’re trying to find out just who is offering green mortgages in your area, I suggest checking the Web site of your state’s housing finance agency for information or contacting your state energy office. You can locate that number on the Web site for National Association of State Energy Officials. Contact me for more info at 509-860-2417.