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Green Financing

Here in the United States, there are a number of markets supporting environmentally friendly Real Estate. There are “green” programs in both Residential and Non-Residential Real Estate, such as Bond Funds, Exchange-Traded Funds (ETF’s), Energy Efficient Mortgages (EEM’s), Property Assessed Clean Energy (PACE) programs, among others.

According to Climate Mundial “Green finance refers to any financial instrument or investment – including equity, debt, grant, purchase & sale or risk management tool (for example: investment guarantee, insurance product or commodity, credit or interest rate derivative, etc.) – issued under contract to a firm, facility, person, project or agency, public or private, in exchange for the delivery of positive environmental externalities that are real, verified”

What a mouthful! So, what does all of that mean? Green financing options offer incentives by improving loan terms for the recipient for property owners who invest in energy efficiency. That translates to lower interest rates and lower monthly payments.

Energy Efficient Mortgage

The Federal Housing Administration (FHA) offers an Energy Efficient Mortgage program to help make green energy upgrades affordable. Energy Efficient Mortgages are the focus of this blog, because it goes hand in hand with the Home Energy Rating Services (HERS) rating that BarrierEnergy provides. You can save up to half a percent on your mortgage with certain providers if you pass California State Energy Efficient Mortgage guidelines. An opportunity to save tens of thousands of dollars when purchasing, selling, or refinancing a property is huge! In order to qualify, a HERS test and a building inspection will need to be performed in order to verify basic mandatory upgrades. This option is cost effective and easy.

State-mandated construction codes require owners, architects, builders, and contractors to incorporate increasingly more efficient appliances, systems and features. HERS Raters are trained inspectors who verify energy efficient upgrades. They ensure builders are compliant with energy efficient building codes and score homes based on their efficiency.

Energy Efficient Mortgages can also be used for upgrading new homes. In this instance, HERS Raters would be conducting a home energy assessment to help determine the cost effectiveness of upgrades. The expected savings from installing efficiency upgrades will offset the cost of the improvements. Based on these findings, the FHA approves an allocated amount towards energy efficient upgrades. Therefore, the FHA can guarantee an energy package loan to cover initial installation fees by lumping it in with the mortgage.


The goal of energy efficiency incentives are to catalyze change towards decreasing energy waste. Lack of efficiency causes money and resources to be wasted. At the same time, the value of real estate can be improved, as efficient buildings tend to be more resistant to deterioration. Given the measurable added value of energy efficient upgrades to existing and newly constructed buildings, this one is a no brainer. While saving on energy costs in compliance with California state law, anyone can take advantage of these extra savings.

BarrierEnergy is a family owned business, based out of Santa Barbara, California. We’ve been in the HERS Raters industry for over a decade! Reach out to our experts for more information about this service. Click here to book a free quote online!

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