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Refinance Your Home for Environmental Improvements and Cost Savings

| Home Ownership

Did you know you can “go green” with a refinance? A home loan refinance or home equity loan doesn’t have to be used for a major addition or home repair; it may be applied to make environmental improvements. Smart energy-conserving modifications can help you do something good for the environment, save money and position your home for better resale value.

Environmental improvements in the home: Where do I start?

One of the first steps in “greening your home” should be conducting an energy audit. This will include a check of heating, ventilating and air conditioning (HVAC) equipment, evaluation of major appliances, thermal scan for heating and cooling losses and assessment of conservation behaviors by family members.

Check within your community for resources to help pay for the energy audit. Local utility companies may provide do-it-yourself audit advice and loan or rent equipment for checking for heat leaks. Some cities offer grants for low-income families to conduct energy audits and implement improvements based on the findings.

What environmental improvements should I make?

Several big-ticket renewable energy items like solar panels and windmills get major publicity. Depending on location, these items may actually decrease rather than increase the value of your home. Be aware that some neighborhood zoning boards require pre-approval before bringing in highly visible energy-conserving changes like this. Check zoning constraints before you invest. If these items do work in your area, research payback periods to ensure you understand what your return on investment will be.

A geothermal heat pump can be installed to use renewable resources for heating, cooling and water heating. Upgrading your flooring to cork provides an attractive and environmentally conscious alternative to hardwood floors.

Other common energy-saving improvements are roof replacement; insulation installation; heating, air conditioning and hot water heating upgrades; and door, window and appliance replacement with materials that provide better energy performance. Look for high Energy Star ratings.

Still more enhancements are do-it-yourself items like using compact fluorescent light bulbs (CFLs), installing a setback thermostat, using a room master control for phantom power draws, and installing low-flow shower-heads and low-volume toilets. Simply weatherizing spot locations by sealing off any drafts at doors, windows, power outlets and dryer vents can make a big reduction in wasted energy.

Finally there are numerous non-investment means of helping the environment. Implement a family plan to turn off lights, take shorter showers, set the thermostat for cooler temperatures in winter and warmer temperatures in summer. Simply applying the “reduce, reuse, recycle” approach to everyday activities will help conserve resources.

Create a plan of everything you’ll want to do and get some good cost estimates. This will help you determine the right size loan to apply for, provide solid justification if needed and manage the costs as the work is being done.

How do I save money by making environmental improvements?

Conservation measures can give positive payback in several ways:

  • The first money savings is the reduction in resource usage and utility costs. Check for payback periods on appliances and HVAC equipment. For example, utility savings from an Energy Star refrigerator may provide payback of the appliance cost faster than you think.
  • The second benefit is positioning the home for better resale. Buyers will consider utility usage as part of their cost of home ownership. Having energy efficiency adds to the selling points for your home.
  • Finally you may be able to claim a tax credit or rebate. Historically the federal government has provided tax credits for renewable energy and energy efficiency measures. Many states and cities also have credits or grants. Visit the US Department of Energy site for up-to-date details. Some utility companies provide rebates for installation of insulation or purchase of higher-efficiency HVAC equipment or appliances. Before you buy, check closely for specific model, timing and documentation requirements to be sure you qualify for incentive programs.
  • If you itemize your taxes, your interest payments on a home equity loan or refinance may be tax deductible, giving you a bit more in tax savings. Consult your tax advisor.

The bottom line for using a loan to green your home is twofold: You may be able to save money and position your property for a better resale value. For many homeowners, the primary benefit is knowing that you have invested in preserving the planet.

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