When President Donald Trump floated the idea of a 50-year mortgage last November, it ignited a debate over housing affordability.

One analysis showed that a borrower with a $500,000 loan could save $165 per month, but they would pay more than twice as much interest with a 50-year mortgage compared with the 30-year option.

What if there was another way to address affordability without taking out a lifelong loan?

The mortgage underwriting process currently accounts for principal, interest, taxes, and insurance (PITI) in the total cost of the loan. However, this calculation ignores one high, recurring cost of homeownership — utility bills, including energy and water.

The total mortgage cost is less when someone buys a home in an area with low property taxes or low property insurance rates. Consumer “buying power” is increased in these lower cost areas, while it decreases in areas with high taxes or insurance rates.

When someone buys an energy-efficient home, the total cost of ownership will be less, but this isn’t typically included in the mortgage underwriting process.

The Veterans Home Energy Savings Act

As part of the 2023 Consolidated Appropriations Act, the “The Veterans Home Energy Savings Act” came into law. This legislation amends the VA Home Loan Guarantee Program’s process to adjust the residual income calculation for veterans seeking a VA loan. The adjustment allows for utility costs (and associated savings) to be included in the underwriting process when the home is rated for its energy efficiency by a certified HERS® Rater.

In 2020, RESNET® — a nonprofit, national standards body for energy-efficiency rating and certification systems — commissioned a study to assess the potential impact of the then-proposed legislation. The analysis found an “additional buying power” between $13,000 (San Diego) and $24,000 (Dallas). This resulted in a “relative buying power” of between 2.4% and 10%.

The relative buying power was a function of the additional buying power and the local median home price.

Changing mortgage underwriting to account for energy savings

RESNET published a policy proposal in 2020 to incorporate energy use in mortgage underwriting. This proposal would revise the traditional PITI calculation (principal + interest + taxes + insurance = total cost) to include energy savings. The revised calculation would be:

Principal + Interest + Taxes + Insurance – Energy Savings = Total Cost

The following example illustrates the impact of using a theoretical 50-year mortgage compared to including energy savings in the debt-to-income (DTI) ratio of a 30-year mortgage. The following variables are used for this example:

• Home price: $410,000
• Down payment: 20%
• Interest: 6.3% (30-year mortgage); 6.8% (50-year mortgage)
• Property taxes: $2,500
• Property insurance: $2,000
• Gross monthly income: $7,000
• Other monthly debt: $500

DTI should typically be less than 43% for automated underwriting. The traditional debt-to-income calculation is:

This calculation produces the following DTI for each mortgage:

30-year mortgage: 41.5%

50-year mortgage: 39.9%

When incorporating energy savings into DTI, the calculation is now:

Using the RESNET Building Registry of energy efficient, HERS Rated homes in 2025 produces the following statistics:

• Over 302,000 single-family homes rated
• Median floor area of 2,225 square feet
• Median HERS Index score of 52
• Median monthly energy savings of $88

When incorporating the monthly energy savings into the proposed DTI calculation, the 30-year mortgage produces a DTI of 40.2%. This DTI is just three-tenths of a percent higher than the 50-year mortgage.

When considering some of the most efficient homes in the RESNET registry—those certified to the U.S. Department of Energy’s Efficient New Homes Program (formerly the Zero Energy Ready Home program), we find the following characteristics for homes certified in 2025:

• Over 11,000 single-family homes certified
• Median HERS Index score of 39
• Median monthly energy savings of $148

Incorporating the increased monthly energy savings into the proposed DTI calculation produces a DTI of 39.3%. This DTI is six-tenths of a percent lower than the 50-year mortgage example.

These examples show that energy efficiency can improve mortgage qualification without extending loan terms.

Understanding energy savings calculations

A HERS Rated home must be certified by an independent, certified professional. A HERS Rating can be conducted on both new construction and existing homes.

The monthly energy savings number for the HERS Rated home examples is based on a comparison to the HERS reference home. The HERS reference home would score a 100 on the HERS Index scale and a net-zero energy home would score a zero, meaning the home produces as much energy as it uses on an annual basis.

The reference home is based on 2006 International Energy Conservation Code (IECC) and federal equipment efficiency standards in effect at that time. To put this in the context of energy-efficient construction practices, only 13 states had adopted the 2006 IECC by 2010. This means most homes built prior to 2010 would be expected to have HERS scores higher than 100.

Reduced default risk?

Living in an energy-efficient home helps reduce the volatility and payment shock that may come with utility bills, but can it also reduce the risk of mortgage defaults?

The University of North Carolina’s Center for Community Capital and the Institute for Market Transformation (IMT) released a report titled Home Energy Efficiency and Mortgage Risks in 2013. The report showed that the default risk for owners of energy-efficient homes was 32% lower compared to their non-efficient counterparts.

A 2019 study by Freddie Mac assessed 70,000 HERS Rated homes plus five unrated comparable homes for each rated home. The study found that “loans in the high debt-to-income (DTI) bucket (45% and above) that have ratings, however, appear to have a lower delinquency rate than unrated homes.”

The study also stated that “rated homes have lower delinquency rates than unrated homes, both in terms of becoming ever 60 days and ever 90 days delinquent.”

There are many factors that contribute to mortgage default risk. Although the Freddie Mac study could not specifically attribute higher energy costs with a higher mortgage default risk, it could be a contributing factor.

Bottom line

In the examples above, the energy savings from a typical HERS-rated home nearly close the affordability gap between a standard 30-year mortgage and a 50-year loan. For the most efficient homes, those savings outperform the 50-year mortgage in debt-to-income terms.

In other words, efficiency can deliver the same — or better — buying power as a longer mortgage term, while preserving the financial protections of a traditional loan.

For builders, this distinction matters. Energy efficiency is not a future policy concept or a new mortgage product — it is a design choice already within a builder’s control. A lower HERS Index score could translate into improved buyer qualification and long-term affordability.

As policymakers and lenders search for solutions to the housing affordability challenge, extending loan terms may be one option. But the data suggests another path is already available: recognize energy efficiency as the predictable, recurring cost reduction it is — and allow it to work alongside the mortgage, not outside it.

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