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With low interest rates, financing offers are means to cut costs, carbon footprint
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CARBON FOOTPRINT | GREENER HOMES

With low interest rates, financing offers are means to cut costs, carbon footprint

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Susan Andersen had two goals when she moved to rural Green County in 2006: She wanted a native prairie, and she wanted to power her home with renewable energy.

She got the prairie established about five years ago, but renewable energy was more elusive. Her 3-acre property wasn’t big enough to support a wind turbine, and solar panels always seemed out of reach.

By last fall, falling prices had made solar a viable and attractive option. There was only one problem.

“I don’t have $17,000 sitting around in the bank,” Andersen said.

She did have equity in the home and an interest rate well above 3%, which meant she could refinance the home, taking out enough cash to pay for solar panels, storm windows and other energy-efficient improvements, lowering her monthly mortgage payment and slashing her electricity bill by about 90%.

“Last month it was $8,” Andersen said.

New research shows nearly 200,000 Wisconsin homeowners could also save money and shrink their carbon footprints by refinancing, while new homebuyers can take advantage of a little-known tool to finance energy and cost-saving improvements.

The idea is simple: By borrowing money to pay for things such as insulation, weatherization and rooftop solar panels, homeowners can cut their utility bills enough to offset the cost of the loan. And because interest rates are at all-time lows, many can also shrink their monthly mortgage payments.

The report, produced by Green Homeowners United, used data from the analytics firm Black Knight to estimate the number of homes in each county with mortgage rates at least 0.75 percentage points above the current lending rate.

Based on home values, the report estimates the average homeowner could finance more than $32,000 in energy-related projects, saving about $226 a month.

“That’s enough to pay for solar panels, insulation, air sealing,” said Kevin Kane, founder and chief economist of the West Allis-based startup. “When you spread most energy-saving things over 20 to 30 years, it inevitably saves more than it costs. The only loser here is the utility.”

And it’s the most effective way for homeowners to reduce their share of planet-warming gases.

“We have the biggest chance to make a dent right here in our communities,” Kane said. “It is more important than making every car an electric vehicle.”

Green Mortgages

Stephen Melde tracks the production of his solar panels. After his daughter Sophia, right, became interested in climate change, Melde discovered a program that helps homeowners finance energy improvements. 

‘Something we can do now’

To be sure, cutting greenhouse gas emissions enough to avoid the most catastrophic effects of climate change will require systemic changes: Cleaning up the electric grid by closing coal and gas-fired plants while electrifying other fossil fuel sectors such as transportation and heating.

But for homeowners who want to make a difference, the single most effective step they can take is cutting their home energy consumption.

The Natural Resources Defense Council found improving residential energy efficiency alone could cut U.S. carbon dioxide emissions by up to 550 million metric tons a year, equivalent to the electric power emissions of California, Texas, New York, Florida, Illinois and Virginia combined.

Stricter building codes would improve energy use in new construction but not in the millions of existing buildings, said Lauren Urbanek, senior energy policy advocate for the NRDC.

“You’re not going to get to some of these big carbon goals without addressing energy use in our buildings,” Urbanek said. “Addressing those is going to take a lot of individual action — addressing millions and millions of homes — from a motivational perspective and a financial perspective.”

Kirk Lund is using a green mortgage to finance solar panels, windows, insulation and a new boiler-water heater for his Lake Mills home, upgrades he expects to pay off through a lower interest rate and energy bill savings.

Though frustrated by the lack of political will to address climate change, Lund said it’s satisfying to know that there is something he can do.

“This is one concrete thing we can do in a situation where we sometimes feel powerless,” he said. “This is something that we can do now.”

Green Mortgages

Stephen Melde and his daughter, Sophia, outside the family’s home in Cottage Grove.

An energy guide

In 2018, Kane bought his first home, a 1950s ranch in West Allis. He said he convinced his lender, Associated Bank, to finance an additional $28,000 in energy upgrades — including insulation, windows and solar panels — that increased his appraisal by $35,000 off the bat and reduced his utility bills enough to offset the higher mortgage payments.

“I would never have been able to add that much,” Kane said. “I was saving for the down payment.”

Kevin Kane

Kane

Kane, who at the time was working for Citizen Action of Wisconsin, decided to start his own business to help others navigate the process.

Green Homeowners United acts as a one-stop shop for home buyers, providing energy assessments, calculating potential savings and connecting them with lenders.

“The barrier is that banks are not energy experts. They sort of needed an energy partner to guide them,” Kane said. “ My job is to identify what is worth doing.”

In the current market, Kane said most homeowners can save if their current interest rate is at least 2.75%, depending on their energy use and utility rates.

“I’ve helped people refinance at the exact same interest rate and still come out ahead,” he said.

Lack of awareness, motivation

Unlike cash-out refinancing, green loans — sometimes called energy efficient mortgages — don’t require built-up equity and allow a home buyer to borrow up to 15% of the home’s value for energy improvements.

But while federally backed mortgage companies Fannie Mae and Freddie Mac have supported green mortgages for years, only a handful of Wisconsin banks offer them.

“Any lender is able to offer green mortgages ... but the majority are not aware or have not signed up,” Kane said. “The biggest barrier is just not knowing.”

Wisconsin Bankers Association president Rose Oswald Poels said there’s probably not a bank in the state that hasn’t leant money to cover some kind of energy-related improvements.

“They just don’t call them that,” Poels said. “Talk to any bank. They all make mortgage loans. If they don’t have familiarity with the product, they know how to find out.”

Tina Mueller, a mortgage lender with Merchants Bank in Onalaska, said most of her green loan customers come through referrals, though she will also suggest tacking on a few thousand dollars to pay for upgrades if buyers are aware of a need.

“This is just another tool in our toolbox that we can help our customers with,” Mueller said. “Especially customers who are passionate about energy efficiency.”

Kathy Kuntz, director of Dane County’s Office of Energy and Climate Change, said green loans are “necessary but not sufficient” to meet the challenges of eliminating carbon emissions by mid century.

She would like to see utilities offer “on-bill” financing, which would open up opportunities for renters and those without good credit scores, but said not enough people understand the benefits of energy-efficient housing.

“You’ve got to have the motivation,” she said. “When people are motivated, these tools are really important to help make the finances work.”

Comfort and control

Dana Gerber-Margie and her husband, Derek, used a green mortgage to finance about $6,000 worth of insulation, weatherization and plumbing updates to their 1924 home on Madison’s Near East Side.

Gerber-Margie said the loan added about $60 to their mortgage payment but has cut their gas use almost in half and lowered their electricity use even with her working from home this past year.

The 34-year-old librarian said the improvements made their home more comfortable and gave them a feeling of control.

“This is the first home that I’ve owned,” she said. “I want to maintain the house. I feel like we did some really valuable things.”

Susan Andersen

Andersen

Andersen, an occupational therapist who teaches Zen meditation at her home in Monroe, said green financing allowed her to reduce harm, a key tenet of her practice. She hopes other homeowners can use the same tool for a collective benefit — without a financial sacrifice.

“My little difference of causing less coal to be burned is small, but ... if everybody who owned homes did this it would have a huge impact on global warming,” Andersen said. “We aren’t powerless. We can make personal choices that will help.”

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