Home Mortgages at Below Market Interest Rates

Leaving the busy highway and leisurely driving through any Nebraska town will confirm what most housing experts already know: homes are built to last many decades, and most do.

According to a state government report, nearly a third of the homes in the Nebraska were built 60 years ago or longer.

Decisions made at the time a home is built, can have decades-long ramifications. One of the rationales behind energy efficient mortgages is that it is far less expensive to build a home to use energy more efficiently than try to add the energy saving features after a home is built.

Lower Bills, Bigger House

Another energy efficient mortgage concept is that people who own a home that uses energy wisely can afford to pay more on the mortgage because their utility bills are lower.

National lenders such as Freddie Mac, Fannie Mae and the Veterans Administration have offered energy efficient mortgages for several years. These mortgages offer more liberal income-to-debt and loan-to-value ratios, but have not been widely used by homebuyers.

Last summer, the Energy Office, in cooperation with the state's lenders, began offering energy efficient mortgages with a difference: the more energy efficient the home, the more the interest rate on the mortgage loan is reduced, up to a maximum of 1 percent.

The mortgage loan fund is capitalized with $2 million in oil overcharge funds. Oil overcharge funds are a result of various court actions against oil companies that overcharged their customers during the period of federal energy price controls from 1973 to 1981.

The Lucky Few

In less than a year and with almost no marketing, the agency has financed 43 homes totaling $4.6 million with energy efficient mortgages. Another 20-30 homes are likely to be financed with the original oil overcharge funds. "We had
originally hoped to finance 300 homes with these mortgages," John Osterman of the Energy Office said. "We underestimated the number of new homeowners willing to build a home that is 30 percent above current energy codes." Osterman said more of the agency's funds are used when homebuyers select the most energy efficient option.

Loan repayments from the first mortgages will allow the agency to finance additional homes in the future. The Energy Office projects 5-15 homes a year could be financed with the mortgages. "Unfortunately, the number of homes financed is minuscule compared to the 4,500 built yearly in Nebraska," Osterman said. "The Energy Office has proved there is a large demand for energy efficient homes."

The Energy Office purchases 5, 10, or 20 percent of the permanent mortgage at no interest on qualifying homes, based on the efficiency level the homebuyer plans to meet. The efficiency level selected can reduce the mortgage loan rate by 1/4, 1/2, or 1% respectively.

For more information about energy efficient mortgages, contact John Osterman in the Energy Office.