There are a host of reasons why energy efficiency is better for everyone in the long run: It saves homeowners incredible amounts of money in utility costs, it promotes a more effective utilization of resources and it's an environmentally conscious way of living. But a study conducted by a team of economists at the University of North Carolina has discovered one more reason to tack onto the list: It's good for your credit. More specifically, it finds that homeowners with fewer and lower energy expenses prove to be better mortgage borrowers, with lowers risks of delinquency or default.
The study, entitled "Home Energy Efficiency and Mortgage Risks," reaches a number of conclusions on this front. As the Natural Resources Defense Council reports, the findings aren't entirely surprising, as it makes sense that tenants living in more energy efficient homes will prove to be better borrowers. After all, if homeowners are paying less in energy costs, they will be in a better spot financially to make mortgage payments. But the study's discovery that lenders and investors typically ignore utilities as part of mortgage underwriting – the process that determines the potential risk of a borrower – is a surprising one.
Utility expenses can greatly contribute to homeowner costs, and their exclusion from mortgage underwriting only hinders both borrowers and lenders. Mortgage lending companies and investors can mitigate this by using models that take a home's expected energy costs into account. This kind of data collection would greatly benefit both borrowers and lenders, reducing costs for the former and risk for the latter.
In the meantime, you can identify your own expected energy costs by scheduling a home inspection today.