“Mortgage demand from homebuyers falls 29% since last year, as interest rates surge past 6%” reports CNBC on September 14th 2022. While since last year homebuyers’ demand for mortgages has fallen by nearly a third, there is a bright light on the horizon for mortgage loan companies with the advent of solar partnerships and the momentous passage of America’s Inflation Reduction Act.
Why should property owners worry about reducing their carbon footprint as they face rising mortgage rates, raging inflation and skyrocketing food and fuel prices? With passage of the Inflation Reduction Act (IRA), Americans can ease their transition to zero-carbon, renewable electricity with the billions of dollars in tax credits that will be issued to support battery, wind, solar and other clean energy industries.
Inflation Reduction Act Creates National Green Bank
This bill will “provide a range of incentives to consumers to relieve the high costs of energy and decrease utility bills.” This includes direct consumer incentives to buy energy efficient and electric appliances, clean vehicles, and rooftop-solar, and invest in home energy efficiency. A significant portion of the funding going to lower income households and disadvantaged communities.
The Inflation Reduction Act (IRA) provides $27 billion for a Greenhouse Gas Reduction Fund which “could spur 10x as much in private-sector lending for community solar, efficiency and more in underserved neighborhoods,” reports Canary Media.
As reported in the IRA, environmental benefits include:
- $9 billion in consumer home energy rebate programs, focused on low-income consumers, to electrify home appliances and for energy efficient retrofits.
- 10 years of consumer tax credits to make homes energy efficient by making heat pumps, rooftop solar, electric HVAC and water heaters more affordable.
- $4,000 consumer tax credit for lower/middle income individuals to buy used electric vehicles, and up to $7,500 tax credit to buy new electric vehicles.
- $1 billion grant program to make affordable housing more energy efficient.
Even before the passage of the IRA, we have seen more and more loan companies offering energy-efficient “green mortgages” that allow borrowers to finance energy-efficient improvements under advantageous loan terms. A green mortgage offers added funds with the mortgage purchase or refinance that can be applied to energy-efficient upgrades.
Largest U.S. Home Lender Goes Solar
Consider the expansion of Rocket Mortgage into solar with the launch of Rocket Solar to advise potential clients, connect them to the company’s digital financing application, and facilitate the solar installation. As the largest home lender in America, Rocket Mortgage’s “first step into green energy” included releasing “a new rate-and-term refinance giving homeowners the ability to consolidate any solar panel loan with their mortgage for one low interest rate,” the company said in a statement.
Whether a solar system is bought or leased, the use of solar energy dramatically decreases a homeowner’s monthly energy costs while increasing the value of their home.
A green mortgage can increase an individual’s purchasing power and allow home buyers to qualify for a larger mortgage. People buying a home that already is energy efficient can lower their monthly bills. Businesses are also turning to green mortgages to improve energy efficiency.
Commercial Lenders & Energy Efficient Mortgages
Consider Fleet Mortgages’ entrée into the commercial green mortgage buy-to-rent sector with their announcement of their “first entry-level foray into provision of green mortgages for landlord borrowers” as reported by FT Advisor.
According to the U.S. Office of Energy Efficiency And Renewable Energy, the average cost of solar PV panels has dropped nearly 70%. Solar energy is economically competitive with conventional energy sources in most states.
Getting a solar system installed is like creating your very own power plant. Property owners make energy right on their own property instead of relying completely on the utility company to do it for them. While you can’t disconnect completely from the grid, tapping into solar energy allows you to generate your own power every sunny day.
When President Biden signed the Inflation Reduction Act (IRA) into law in August 2022, we became witness to the largest federal investment in alternative energy and sustainability in American history. As Americans, we can use the new green energy tools available to us to help our country reach its ambitious goals of carbon neutrality.