Considerations in Financing and Building a New Green Home
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Building a new home, especially one that features green foundational elements, will present financing challenges to most who take it on. Builders and lenders must be prepared to engage in a dialogue that encompasses considerations that aren’t traditional to homebuilding and lending jargon. Add appraisers and insurance companies to this list, plus any others who are considered part of the supply chain.
Builders and lenders must be prepared to engage in a dialogue that encompasses considerations that aren’t traditional to homebuilding and lending jargon. Add appraisers and insurance companies to this list, plus any others who are considered part of the supply chain. From design to understanding the construction of innovative, sustainable HVAC systems, all players must have a solid foothold on how the short and long-term financing of this structure can be structured in positive way.
Kelly Hart of Green Home Building cites the dome he once built, noting the appraiser’s initial reaction. “They never loan on domes,” he was told, a reality that turned out to be true.
Hart’s moral to his experience: Don’t expect large bankers to embrace unusual construction. “I know that quite a few straw bale houses (that look otherwise fairly normal) have been financed conventionally, but the industry really needs to be educated about the value of natural, sustainable architecture,” he adds.
The soundest way to finance the building of a house is without going into debt. However, this is much easier said than done for the majority of people.
- The significant expense of a green energy retrofit on an existing home isn’t required; green elements – whether smart meters or solar singles – are usually included in the overall home/financing package the buyer is taking on.
- With a new home, there are generally no surprises for the buyer who moves in. You know how your green house was built and what the warranties are.
- For the budget-minded, monthly utility expenses should be significantly lower, if renewable energy has been incorporated in the design of the home.
- The technology of green home building has improved tremendously over the past few years, including overall energy efficiency. This benefits both owner and lender.
- The majority of green homes being built today are part of a planned community designed to support activities such as recycling, water conservation, xeriscape gardens, etc. Such features appeal to bankers.
New green developments are generally designed to foster a spirit of environmental awareness and neighborliness, balancing private and public areas. Walkways and bike paths meander through such developments, and it is increasingly common to see lender residing in these same areas.
Research from the potential borrower about things like green housing, renewable energy, or sustainability is always going to be helpful when meeting with a lender. Many will be happy to see a borrower so well prepared.
This article has been written with the support of Cordell Projects.
Photo credits: iStock