As we have begun signing Contest Agreements with Homeowners in the Smarter, Safer, Greener House Contest, the biggest issue rasised by Homeowners is that of financing the cost of the renovations.
Setting aside for the moment all of the environmental and economic stimulus issues, let’s examine why a homeowner may choose to renovate their home and where they would ordinarily get the money.
Homeowners commonly renovate their homes to improve the aesthetics, the utility and the economic impact. Aesthetics is the look and feel of a house, its curb appeal, the sense of security and other emotional characteristics. Utility refers to the functions of a house such as living, storage, entertainment, security and comfort. The economic impact includes the reduction in operating costs and increase in building value. The decision to renovate is based upon a decision that the cost of renovation will result in an improved value to the homeowner that justifies the cost. This decision is largely financial.
In simple terms, the cost of renovation may serve to reduce the energy bill while increasing the property value.
As previously discussed in prior blog posts, alternative energy adds another factor to this equation. Production of energy may not only reduce the energy bill, but also create a revenue stream.
Again in simple terms, if a homeowner finances the renovation, they expect to make installment payments over a period of time. The installment payments include the total cost of the renovation and the interest charges for the ability to make payments over time.
If the reduction in monthly energy bill is greater than the size of the installment payments, then the homeowner should invest in renovation.
If the installment payment is greater than the reduction in the monthly energy bill, the homeowner may still choose to renovate based upon the improvement in aesthetics, utility and increase in property value.
In different geographic locations, including Longmont, Colorado, there are government programs that may serve to reduce the amount of the installment payment. This may take the forming of subsidized financing or tax credits. It may also open up financing not available through commercial markets.