Insight Articles | August 24, 2021

Energy Efficient Mortgages: A Texas Case Study

The Single-Family Team
Freddie Mac

After a winter storm triggered massive power outages in Texas early this year the concept of energy independence from the state’s electricity grid has surged in popularity among homeowners. But solar installation isn’t cheap, starting around $13,000 for a median-sized home in Austin, Houston and Dallas.

Compared to home equity or unsecured consumer loans, an energy efficient mortgage (EEM) or “green mortgage” is an uncommon but attractive way to fund major energy upgrades for homeowners and homebuyers. By understanding the economics of these loans, lenders can grow business with borrowers seeking a way into the Texas real estate market or refinancing to sustain homeownership.

^{Infographic sources:}

^{https://stacker.com/stories/1463/states-get-most-sunshine}

^{https://texassolar101.com/texas-solar-faqs/}

^{https://comptroller.texas.gov/economy/fiscal-notes/2018/april/solar.php}

^{“Shining Cities 2020,” revised June 2020, Frontier Group.}

^{Moody’s Analytics.}

^{Borrower must pay total pre-tax cost upfront to solar installation contractor. Income tax credit can only be deducted afterwards.}

^{Assumed 10% down payment and rate of 3.13%, 04/08/2021 Freddie Mac Mortgage Market Survey Archive.}

^{Assumed 5.8% rate for 15-year home equity loan, Bankrate.com, 04/08/2021.}