An Energy Efficient Home May Mean Lower Mortgage Risk

Even as America recovers from the housing market collapse, homebuyers are still looking for ways to lower the risk of buying or building a home. “Green living” isn’t something most people think about when they consider ways to lower this risk, but new research indicate that it should be.

According to a University of North Carolina study, owners of energy efficient homes are less likely to default on their mortgage.

What the research says

Researchers looked at 71,000 single-family homes scattered throughout the US, about 35% of which were Energy-Star rated for efficiency; the odds of a homeowner in this 35% defaulting on his or her mortgage was one-third that of the less efficient homes.

The researchers also looked at home loan records between 2002 and 2012 — sure enough, the more energy efficient the home, the lower the risk of default.

3 reasons home efficiency and mortgages are related

Although at first glance a home’s energy efficiency and an owner’s mortgage risk might not seem related, the researchers give three possible reasons for their findings:

  1. An energy efficient home makes bills easier to predict, so no one is ever torn between paying the mortgage or an unexpectedly high heating bill.
  2. Homeowners who compare the upfront costs of building a green home (or of energy improvements to an older home) versus the long-term savings are equally conscientious when it comes to their home loan.
  3. Mortgage holders on Energy Star efficient properties are less likely to prepay. Some lenders consider prepayment a risk, so these loans may be more valuable to them.

Save green by going green

Heating, cooling, and water bills are the second highest cost in home ownership — right after mortgage payments. Investing in an energy efficient home not only reduces mortgage risk, it also allows you to put those savings toward other things that matter.

As a certified green builder our team builds custom homes that are beautiful, comfortable, and energy efficient as possible. Visit our portfolio to see more of our custom homes, or contact us now to discuss how we can help you design and build your dream custom, energy efficient home.