Green Mortgage Pilot in Vermont, and Beyond
Financing can be the trickiest part of the deep energy retrofit equation. The EnergyFirst Mortgage, now in its pilot phase, is a green mortgage program designed to solve that aspect of the equation. The pilot was created in partnership with the Vermont-based credit union VSECU (Vermont State Employees Credit Union), ClearlyEnergy, and Energy Futures Group.
An EnergyFirst Mortgage rolls the cost of a deep energy retrofit into a mortgage. “There is a tremendous opportunity every time someone takes out a mortgage to increase it to cover the cost of energy improvements,” says Richard Faesy, principal at Energy Futures Group. “There is no other lending vehicle that makes high-cost projects as affordable as the mortgage.”
With help from a Small Business Innovation Research grant from the U.S. Department of Energy, the EnergyFirst Mortgage program was initiated in February 2021 with a pilot phase that is open to those refinancing existing mortgages in two Vermont counties—Chittenden and Washington. The goal is to help cover the costs of weatherizing, adding insulation, implementing air sealing, increasing energy efficiency, and adding renewable energy to existing homes.
From the beginning, VSECU and its partners intended to eventually scale the EnergyFirst Mortgage beyond Vermont. The pilot phase has ten projects, none of which are attempting Passive House at this time. If awarded a DOE Phase 2 grant, the team will open the program to all of Vermont, New York State Energy Research and Development Authority (NYSEDA) partners, and the Center for Energy and Environment (CEE) in Minnesota beginning in summer of 2021. Phase 2 seeks to enroll up to 150 projects over two years. Phase 3 would expand to additional states.
ClearlyEnergy—a solution marketplace for energy-efficient products and informative guidance—has been a key partner in developing the mortgage product. The firm devised a portal platform that compiles all of the information needed to make loans less risky, such as loans in process, status updates, contractors and energy coaches involved, and the various retrofit offerings.
The pilot program requirements stipulate that the retrofit costs must be at least 10 percent of the mortgage, meet a minimum loan amount of $10,000, and that the property be owner-occupied. VSECU is offering .5% off their published interest rate for refinancing pilot projects, as well as covering up to $1,000 for the green home appraisal and offering free access to an energy coach and pre-and post-retrofit DOE Home Energy Scores. The financial benefits add extra encouragement to those applying in the pilot phase, but these additional services may not be available in Phase 2 or 3. Expanding the mortgage to home purchases, not just refinancing existing mortgages, will utilize ClearlyEnergy’s automated energy model to flag high usage homes for buyers.
VSECU has an existing green lending program, with other green mortgage products, but this product is the first to feature a discounted interest rate and wraps new energy improvements into the mortgage. Credit unions are member-owned, financial cooperatives, and their mission-driven focus drives the loan product development. Laurie Fielder, VGreen Program director at VSECU, said that the credit union could justify this pilot program because it fits their mission and benefits their member-owners. “Just offering a product and having it available doesn’t mean people are going to take you up on it. The trick with this particular type of loan product is that it wraps around and offers that customer service that is needed to understand the value of energy improvement,” Fielder says.
Photo courtesy of Building Energy.