Energy-Efficient Homes May Be Eligible For CMHC Mortgage Refunds

BOB AARON

As part of its program to promote energy efficiency, Canada Mortgage and Housing Corporation is now offering a 10 per cent refund on its mortgage loan insurance premiums to purchasers of new or resale energy-efficient homes, or those who renovate homes to make them more energy efficient.

Purchasers of energy-efficient homes will also be eligible to opt for a longer amortization, up from 25 years to 35 years. Since the amortization is the period of time needed to repay a mortgage if it was allowed to run its full course, extending the payout period to 35 years from the regular maximum of 25 years will significantly reduce monthly mortgage payments.

For example, on a $200,000 mortgage at 4.5 per cent, the monthly payment savings would be about $165, but running the mortgage for an additional 10 years would cost an extra $62,000 in interest over the term.

The new CMHC policy is part of the Canadian government's program to promote conservation of energy and reduce greenhouse gas emissions. Here's how it works: Environment Canada and Natural Resources Canada (NRCan) have set up the Energuide for Houses program to help homeowners make energy-saving choices when buying or renovating a home. For a fee of about $300 to $350, a qualified private energy advisor will evaluate a home to determine its energy efficiency rating on a scale of zero to 100; see <http://www.energuideforhouses.gc.ca/>. Energy advisors can be found on the same website.

Consumers thinking of building or buying an energy-efficient home should be looking for one that:

• Is an R-2000 model.
• Has an Energuide for Houses rating of 77 or more.
• Was or will be built under a CMHC-eligible energy-efficient building program.
• Is a condominium unit in a high-rise that meets the requirements of NRCan's commercial building incentive program.

Houses that qualify could be eligible for a reduction of 10 per cent on CMHC premiums for high-ratio mortgage insurance. In actual dollars and cents, the savings could be substantial. For example, on a $200,000 mortgage with a 90 per cent loan-to-value ratio, the regular CMHC premium would be 2 per cent, or $4,000. A 10 per cent reduction would create a refund of $400. With a 95 per cent mortgage and a 2.75 per cent premium, the 10 per cent energy savings would be $550.

In addition, the premiums in Ontario are subject to the provincial sales tax, so the actual savings in these examples would be $432 and $594 respectively. As well, interest would accrue on this money for as long as 25 or 35 years until it is paid off making the energy refund even more attractive.

Anyone planning to buy, or build, a home should be looking for one that has a rating of 77 or higher on the EnerGuide scale and should obtain an EnerGuide for Houses evaluation as the first step in qualifying for the 10 per cent insurance premium refund. This also applies to owners of existing homes who want to finance an energy-efficient renovation with a CMHC-insured mortgage loan.

The bottom line is that the cost of the energy evaluation is roughly offset by the reduction in the mortgage insurance costs. The payoff, according to CMHC, is the welcome reduction in monthly utility expenses, a lowering of greenhouse gas emissions, and ultimately, a house that is more attractive to future buyers because of its energy-saving attributes.