How to Fuel Switch
For most people, financing is one of the keys to Fuel Switching. Here are a few options that outline the best ways to finance a Fuel Switch project.
If paying in cash is an option for you, it is often the best way to go. With our MIRR calculator, you can see how investing in your energy upgrade project compares to a standard investment.
Advantages to paying cash:
- Avoid paying loan fees and interest to a bank
- Oftentimes yields are better than a conventional low-risk investment
- Cash is now tied up in your home improvements, instead of being liquid in the bank
Refinance a mortgage
You will almost always save money on a month-to-month basis by putting energy efficiency improvements into a standard 30-year mortgage. If you have equity in your home, you can usually use that money to do a “cash out” refinance. If you don't have enough equity in your home to cover the costs of energy efficiency improvements, consider the HomeStyle Energy Loan or other loans available for homeowners interested in energy efficiency upgrades.
Advantages to refinancing a mortgage:
- Of all the available financing options, refinancing often provides the lowest monthly payment as well as a positive cash flow on day one
- Streamlines paperwork into just one loan payment each month
- May also lower your interest rate on your home
- The process of refinancing entails full credit checks, income verification, a home appraisal, and other time consuming steps
- There are often lending costs associated with getting a new loan
- Your current loan rate may be lower than the rate you can get with a new mortgage
Home equity line of credit
Also known as a “HELOC” or a second mortgage, this is often a flexible way to pay for any home improvement project. Using the equity in your home as collateral, you can get great loan rates and terms.
- Easy to get and to use, it HELOCs function similarly to a checking account
- Usually offers good rates
- HELOCs often have “variable interest rates” that can change over time
- Sometimes, there is a time limit whereby the whole loan needs to be paid off after a specified number of years.