The month of April includes Earth Day, a great time to consider making energy-efficient improvements to your home. Not only are these upgrades good for the environment, but they are also good for your pocketbook. In this blog, we will discuss ways you can improve your home’s energy efficiency, as well as the best ways to fund these projects.
How Does Home Energy Efficiency Work?
Modifying your home to make it more energy efficient is the smart way for homeowners to update their homes and save on their utility bills, especially if they have older homes. There are a range of things you can do to improve efficiency. They start with switching out incandescent light bulbs for money-saving LED bulbs and can get as involved as installing solar panels that generate electricity for your home which you may be able to sell back to your electric company.
Keep in mind those larger improvements, such as installing solar panels, are major projects that can be expensive. But the goal is to reduce your energy costs, refresh your home and have a more positive impact on the environment, according to USNews.com.
Steps To Become More Energy Efficient
As previously mentioned, you can start with just a change in the type of lightbulbs you use. From there, you can explore adding high-efficiency washers, dryers, refrigerators and other appliances that carry the Energy Star logo. Other ideas are to insulate your water heater, place weather stripping on your windows and doors, and install light motion-sensors to ensure lights are turned off when a room is empty.
There are energy-efficient things to do that do not require a purchase. For example, you can change the time of day and the day of the week that you do laundry to avoid peak energy costs, which are usually between 4 and 8 p.m. during the summer. You can use standing and ceiling fans to cool your home instead of running the air conditioning. You can limit the use of appliances and more.
All of these small and large updates can make a difference to your budget while being Earth-friendly, according to Trademaster's Service, Inc.
Ways to Pay for Your Upgrade
As a homeowner, there are a few different ways to finance energy-efficiency upgrades. They include a home equity line of credit, home equity loan, personal loan and energy-efficiency loans, such as those offered by Travis Credit Union. Each loan product is a little different so let us explore how they work and which one may be the right one for you.
- Home Equity Loans: A home equity loan lets you borrow from the available equity in your home without the need to refinance your current mortgage. This type of loan lets you borrow a set amount and pay it back in fixed, monthly payments over a specific term. These loans tend to have lower interest rates compared to personal loans because you are using your home as collateral, making it a secured loan. The fixed interest rates and fixed terms will remain the same for the life of the loan, making it a great option for those who prefer stability in their rates and payments, says Investopedia.com.
- Home Equity Line of Credit: A home equity line of credit, or HELOC, is a line of credit that taps into your home’s equity. Your lender will determine the amount available for your HELOC that you can use during the draw period. During the term, which could be 10 years, you will be required to make minimum monthly payments based on interest only. Once the draw period ends, you will no longer be able to withdraw funds and the repayment period takes over.
During this repayment period, which could be as long as 15 years, you’ll pay back the interest and principal borrowed at a fixed rate each month. These loans are great for individuals who want access to funds quickly but do not yet know how much or when they may need to borrow for their energy-efficiency home projects.
- Energy-Efficient Project Loans: Energy-efficient project loans let you borrow only for projects that involve energy-efficiency upgrades. The loan amounts are based on the actual costs of the project, which you will pay back with a fixed rate and fixed terms. Much like personal loans, these loans do not require collateral, making them unsecured loans. Depending on your lender, you may need to show proof upfront of the intended work via an invoice, appliance contract or other documentation. This is a good option for homeowners who do not want to tap into their home’s equity to fund their upgrades.
- Personal Loans: A personal loan can also be used to make upgrades to your home. There is no collateral needed so getting approved for this loan may be quicker than home equity financing. This loan lets you borrow a set amount of money that will be repaid over a specific term at a specific rate, according to Forbes Advisor.
As you can see, there are several ways for homeowners to fund energy-efficiency upgrades to their homes. Deciding which loan is right for you depends on your financial situation. First, determine the overall cost of your project and then check with several lenders to see what loan options and rates might be available to you.
How Can TCU Help?
Travis Credit Union offers all of the loans discussed to help with your energy-efficiency upgrades. Go online at Traviscu.org, stop by one of our branches or give us a call at 800-877-8328 to learn more about financing for energy-efficiency improvements.