New homebuyers in Canada can now save $700 to $1,000 a year on utility bills, get a refund from the government, and take advantage of a 35-year amortization – all by purchasing an energy-efficient house.
Canadian Mortgage and Housing Corp. is offering buyers a 10 per cent refund on the one-time premium charged for the mortgage insurance CHMC provides. CMHC assists homebuyers making down payments of 5 percent to 25 per cent, by insuring these high-ratio mortgages. The premium varies with the percentage borrowed.
For example, with a CMHC-insured high-ratio mortgage for 90 per cent of a $300,000 home purchase, the premium would be 2 per cent, or $6,000. The rebate in this case would be $600.
CMHC is also offering a 35-year amortization. By extending the amortization- the total lifespan of the mortgage – to 35 years (most amortizations are 20 to 25 years), mortgage payments are lower because they’re spread out over a longer period of time, and th savings can be applied to energy-efficient upgrades.
“You can buy more house with energy-efficiency upgrades with the same income,” says Mark McInnis, national manager of underwriting for CMHC.
“The trade-off is you’re paying for a longer term which means a bigger loan, but we find as salaries increase, people tend to shorten their amortization periods anyway. This longer amortization gets you in the door.”
To qualify for this program, a home’s energy efficiency must be rated using Natural Resources Canada’s NRCan EnerGuide for Houses rating system and meet certain requirements geared to save energy and utility costs.
Homebuyers apply for the program when arranging the mortgage. For more information, call 1-800-668-2642 or visit: www.cmhc.ca.
“Our builders are very excited because they can build better homes that save money. The rebate is great but the amortization is the sleeper,” says Don Johnston, director of technology and policy, Canadian Home Builders’ Association. “There is one builder in Newfoundland who is building his whole marketing strategy around this product.”
The longer amortization means you can spend more money on energy-efficiency upgrades while keeping your monthly mortgage payments the same as if you had hadn’t bought the upgrades, says Barbara Mullally Pauly, senior chief, Housing Programs, Office of Energy Efficiency, Natural Resources Canada .
Pauly explains that while it costs more to make a home energy-efficient, the upgrades can help defray this cost by lowering energy bills and making a home less expensive to run.
By choosing superior windows or insulation over hardwood floors, their heating costs will decrease, making the house cheaper to run. As utility costs are expected to continue rising over time, this could have a significant impact on your overall budget.
“When it comes to buying a house, it’s a very emotional decision,” she says. “It’s harder to sell people things they can’t see. But investing in energy efficiency will give you better returns and the money you save can be reinvested in the home later for other upgrades.”
Although this is good news, some industry insiders feel it falls short of what’s needed.
“It’s a step in the right direction but I don’t think it’s enough,” says Darren Cooper, a professional engineer and owner of Beacon Bay , a company that specializes in high-end production of custom homes in the GTA.
“In the United States , rebates are given on mortgages. If the house heats 50 per cent faster, then you’re spending 50 per cent less. Therefore you get a rebate on your mortgage.”
Lenard Hart, manager of Built Environments, EnerQuality Corp., a delivery agent for R-2000 homes and EnerGuide for New Houses program in Ontario , believes the cost of operating a home should be taken into account by banks.
“Homeowners of energy-efficient homes should be allowed to have more debt because they don’t have the monstrous utility bills,” he says.
There are two types of homes that will qualify for this program: R-2000 homes and homes that score at least 80 on the EnerGuide for New Houses scale. An average new house rates a 70 or 72 and an R-2000 home exceeds 80, according to Peter Love, president of EnerQuality.
“R-2000 homes and builders are kind of like the research and development arm of Canada ’s construction industry,” says Love.
“When an R-2000 home is built, production builders come to look. I’m happy to see that some of the big builders have adapted a few R-2000 features.”
Love explains that an R-2000 home – 30 per cent more energy-efficient than traditional homes – features four unique components:
An R-2000 home must be built by a trained R-2000 builder. For information on R-2000 homes and licensed builders in your area, visit www.oee.nrcan.gc.ca/r-2000.
The home must exceed 80 on the EnerGuide for New Houses Scale. This scale, from one to 100, lets buyers predict the impact of energy efficiency upgrades on their future monthly utility costs. In fact, Cooper, who lives in an R-2000 home himself, says an R-2000 home will have a guaranteed heating cost for three years. If it goes over, you will be reimbursed the difference.
The home must be airtight with the entire volume of inside air exchanged with outdoor air one and 1/2 half times per hour.
“Traditional new home construction is better these days, with better insulation and not much natural leakage,” says Cooper.
“But the building code doesn’t address the problem of increased humidity which means more mould, he adds.
“You need to bring the outside air into the home efficiently to stop mould, which is what sets the R-2000 home apart from other new homes.
“Using a heat recovery ventilator (HRV), fresh air comes into the HRV, is warmed up and filtered to reduce dust and pollens. In traditional homes, exhaust fans suck warm air out of the house and cold air enters through outlets, which is less efficient.”
An R-2000 home must be inspected and certified by a licensed R-2000 service provider. Johnston says there are about 30 in Ontario and they work closely with the builder, like a coach, throughout the building process.
Although the R-2000 home is superior when it comes to energy efficiency, the cost and closely monitored production schedule mean it may never be available for the mass market.
“It’s difficult to meet the air tightness requirement of an R-2000 house,” says Hart. “If anyone knocks a hole in the drywall, it won’t meet the airtight-ness test.”
For many new homebuyers, however, there is the option of upgrading your home’s energy efficiency to 80 on the EnerGuide for New Houses scale to receive the CMHC credit and amortization rate. This rate.
This rating, which is higher than most houses built today, is expected to be the norm five years from now.
“The Government of Canada wants all new homes built to be rated at 80 by 2010,” says Love, “and we’re looking forward to working with them to make it achievable.”