First, you lose money from the day you move in. If you can save more money in your energy bills than the increased effect on your mortgage payment due to your energy efficient design decisions, you are saving money from the day you move in. All of the above are monthly expenses, and when one goes up and the other goes down, and the net effect is in your favor, you are saving money. On the other hand, if you chose to not build an energy efficient home, and your energy bills are larger but your mortgage is decreased slightly, you are losing money if you don’t…build an energy efficient home that is.
First Step is to Analyze the Numbers
So how does this end up working out? First, you need to price out the entire home. This is BEFORE you start construction. You are going to compare the cost of construction not using energy efficient methods to using energy efficient methods. As an example, let’s compare using blown-in or sprayed in insulation (the good stuff) to regular rolls or batts (the not so good stuff). I explain the differences between the two in a previous post, but for now let’s discuss the cost difference. The spray in insulation will give you the same R-factor as the rolled insulation, but you can install the spray in insulation in a 2 x 4 wall…the rolled insulation must go in a 2 x 6 wall. Now your first reaction might be that the difference in cost between 2 x 4 and 2 x 6 construction, considering the only place you would be using this comparison would be for the exterior walls (since you would not typically insulate interior walls), is negligible. You would be correct…but that isn’t the only place this decision has a cost effect. Remember the idea of a system. In this case, since you would not need to place the more expensive product in a 2 x 6 wall, you would also not need to install extension jambs for all the doors and windows like you would in a 2 x 6 wall. If you know anything about construction costs, and if you don’t you will learn quickly, the extra cost of the better insulation is far less than the extra cost of the extension jambs. Thus, the more expensive product, is actually the less expensive decision.
This is but one of many examples of decisions to be made that can greatly influence the cost of the home both now (construction) and later (operating). Not all have an immediate savings like this. Some are exclusively long term savings in the form of lower energy bills, but the end result is the same…savings.
Now if you added up all the construction costs, and had an energy consultant calculate your projected energy bills based on the design of the home and cost of energy in your area, you would end up with two numbers. Both result in monthly expenses, your projected energy bill and your mortgage payment. Remember to do this for both methods of building your home…the energy efficient way and the not so energy efficient way. Now compare the two. If you did your homework, and you did your job properly making cost effective decisions along the way, you should see that the energy efficient construction should have a net monthly total that is less than the non so energy efficient construction. Thus, you are losing the difference between the two every month if you don’t build your home using energy efficient construction methods.
Also, if you find, and you will, that the total cost of energy efficient construction is actually more than no energy efficient construction, the logic still holds. Since you are paying your mortgage off by the month, the increase in your monthly payment should be less than the savings on your energy bill.
Oh, and as a bonus, you get to live in a warmer (cooler in the summer) and healthier home. Now isn’t that special? As an extra bonus, the added savings can either go towards another expense, an investment, or savings. You can even put it back into the house as an upgrade towards something you had to give up so you could stay within your budget. In a way, if your monthly payment dictates your budget, and your overall monthly payment went down, you would have more money to spend each month on your finishes in your home. Upgrade your kitchen, add the whirlpool tub to your Master Bath, put in a more expensive floor or convert the bedroom to a library right now…instead of later.
You can’t, can you. Energy efficient design, unlike the days when you added solar collectors, or thermal mass walls of some type are a thing of the past. You can build one house next to another house using the same design and not be able to tell the one that is constructed using energy efficient techniques…until you went inside and experienced the difference in air and temperature quality, and took a look at the energy bills.