Demand for green homes is rising sharply. The World Health Organization recently laid out a plan to help boost the stock of green homes throughout the world. Unfortunately, it didn’t address concerns about helping people get mortgages for sustainable housing. Dakota Gale, a contributor for Money Geek, highlighted some of the realities of getting a green mortgage.
One thing that was not discussed much is the benefit of getting a green home equity loan.
Here are some additional tips to look at.
Tips for Getting a Green Mortgage
A home equity loan is a great way to pull equity out of your home in order to gain funds to finally complete the kitchen remodel you have been dreaming of, or pay off those high-interest credit cards that have doomed you for years. While it may have a negative connotation to have a 2nd mortgage on your home, it can actually give you a cushion with an affordable payment, at a lower interest rate than a typical credit card. Rewind ten years ago while the nation was in the midst of a housing crisis, finding a home equity loan was near-impossible.
As home values tumbled, borrowers were underwater in what they owed, so the foreclosure signs popped up in seemingly every neighborhood, as many borrowers chose to walk away. This carried on for years, until a combination of rising values and mortgage forgiveness played a part in the rebound. After all, both the borrower and lender can be assigned blame. The borrower knew they were getting into a home they likely couldn’t afford, and the lender allowed these interest-only loans, which was a deadly combination that only set up for future failure.
The good news is that the demand for green homes could help in a couple of ways. Demand for green homes is driving up the value of sustainable houses, which means homeowners could qualify for larger loans.
Meanwhile, we’ve seen rates continue to be offered at historic lows, while home values have steadily increased, creating equity, especially as mortgage balances are decreasing little by little with every payment. Those that bought during peak values prior to the crash have hopefully regained confidence, and value, while others fortunate enough to be able to purchase at its lowest point could have plenty of equity now if they held onto the property. As expensive as the market is now though, due to the demand, any gains would just be put into a down payment on a more expensive home. This means that green homeowners can quality for large loans with low rates.
While gaining access to these funds will likely stop at 80% of your home’s value, you can now have the luxury of applying for a home equity loan or line of credit at a variety of lenders such as your local credit union or any big bank. Much like any purchase you’re in the market for, though this on a much larger scare, comparison shopping is key in order to secure the best rate, line amount, while keeping closing costs to a minimum. Online is a great way to flip from one lender to another in a matter of minutes without the need for an in-person consultation.
When it comes to deciding which option is best for your financial situation, you can keep a few things in mind when getting a line of credit for your green home:
- Do I know exactly how much I need to borrow? A HELOC can be a great way to borrow on your green house as-needed if you’re unsure the total sum, only paying back what you need.
- Am I open to variable interest rates? A standard home equity loan has a fixed interest rate for your green home and has reasonable terms, while a HELOC has a variable interest rate which can hike up your payment significantly.
- Do I prefer a streamlined application process? While you may be able to take out a cash-out refinance for the extra funds and spread out over longer terms, the closing costs and extra paperwork may not be worth it compared to either equity loan option.
Get an Equity Loan on Your Green Home
There are a lot of great ways to get a loan on your home. You can get even better rates if you have a green home.