Default Less Likely in Energy-Efficient Homes

Study finds odds of default are 32 percent lower on energy-efficient homes

home performance auditAccording to a recent study entitled “Home Energy Efficiency and Mortgage Risks,” homeowners who purchase an energy-efficient property are 32 percent less likely to default on their mortgages. The study, which was conducted by the University of North Carolina, was based on about 71,000 mortgages on homes located across the country. After controlling for factors like home size, home age, loan type, local unemployment rate, and local cost of electricity, researchers also discovered a correlation between a home’s energy efficiency score and the likelihood of default. For every one point that a home rose on the Home Energy Rating System efficiency index, the risk of default fell four percent.

Researchers have proposed two possible reasons for the correlation between home energy efficiency, such as that offered by an ENERGY STAR certified home, and reduced risk of mortgage default. First of all, there is the simple fact that money not spent on utility costs can be directed towards the mortgage. Secondly, researchers suspect that consumers who purchase energy-efficient homes are more financially savvy in general and therefore less likely to enter into an unfavorable mortgage agreement.

Benefits of an ENERGY STAR Home

About 35 percent of the homes included in the study sample were ENERGY STAR rated homes. An ENERGY STAR home rating is only awarded to properties that contain:

  • A complete thermal enclosure system, including properly installed insulation, high-performance windows, and a thoroughly sealed building envelope
  • A high-efficiency heating and cooling system that is appropriately sized for the home
  • A variety of water management measures to protect roofs, walls, and foundations from damage
  • ENERGY STAR-certified lighting, appliances, and fans

Together, these property features can provide superior building efficiency and result in lower monthly utility bills.

How Does Your Home Measure Up?

The Home Energy Rating System (HERS) used to evaluate homes in the study has also been endorsed by the California EPA. HERS compares a given home’s efficiency against that of a model home built according to the strict Title 24 Building Energy Efficiency Standards. The higher the score, the more efficient the home. If you’re interested in learning more about your home’s energy efficiency, particularly in regard to heating and cooling, contact General Heating & Cooling today for a home performance audit. We will inspect your home thoroughly, identify any issues that may be causing your HVAC system to perform poorly or waste energy, and recommend a solution.