On-Bill Recovery Loan

1: What is the On-Bill Recovery Loan Program?

2: How does the On-Bill Recovery Loan Program work?

3: Why does the homeowner have to sign a mortgage?

4: When does the On-Bill Recovery Loan Program start?

5: What home improvements does it cover?

6: Is there a maximum income level to participate?

7: Will consumers really see no increase in their energy bills because the financing of energy improvements will be offset by their energy savings?

8: How much is the maximum amount of the loan?

9: What are the financing terms?

10: Will unsecured loans through Green Jobs/Green NY still be available or do consumers have to use On-Bill Recovery to get a loan from NYSERDA?

11: What are the credit standards?

12: Will NYSERDA have a list of participating lenders on the NYSERDA web site?

13: What utilities are participating in On-Bill recovery?

14: Can you participate in the On-Bill Recovery Loan Program if you are a renter?

15: Can you get the work done and do on-bill if you are planning to buy the house but don’t own it yet?

16: Does the homeowner have to use certain contractors to participate in On-Bill Recovery?

17: When does the homeowner need to start paying back the loan?

18: Who pays the contractor?

19: Can do-it-yourselfers participate in the On-Bill Recovery Loan Program for the cost of equipment and materials?

20: What happens if the homeowner doesn’t pay this portion of his/her utility bill?

21: Is there a penalty for pre-payment?

22: Is there a minimum loan amount for an On-Bill Recovery Loan?

23: Does the homeowner have to pay off the loan if s/he sells the house?

24: Are interest payments tax deductible?

25: How will On-Bill Recovery Loan Program affect oil and propane customers?

26: When did the On-Bill Recovery Loan program law pass and what was its purpose?




1: What is the On-Bill Recovery Loan Program?

On-Bill Recovery is available for homeowners making energy efficiency or renewable energy upgrades at their homes. This financing has been made possible by NYSERDA, and allows the cost of an approved energy efficiency project to be tied directly to your utility bill.

Often by having upgrades made to your home you will save enough money on your utility bills to pay off a project cost, and when your home improvement project shows that kind of savings the money that you save can be used to pay off your project.

2: How does the On-Bill Recovery Loan Program work?

There are a number of participants in the financing process:

  • NYSERDA administers the program and provides the capital.
  • Utilities do the billing and collection of loan payments from the homeowner (however, if the customer ever disconnects utility service or has its service disconnected for non-payment, NYSERDA’s loan servicer will bill the customer directly monthly until utility service is re-established).
  • Loan originators review the homeowners’ loan applications to determine eligibility, prepare the agreement and disburse the loan proceeds directly to the contractor. 
  • A loan servicer tracks the status of the loan from the time it is disbursed until the time it is completely paid off. 
  • A mortgage servicer records the mortgage and records its satisfaction once fully repaid.

A homeowner participates in the Home Performance with ENERGY STAR program, where a BPI accredited contractor approved by NYSERDA will perform a comprehensive home energy assessment to identify opportunities for energy savings.  The contractor will write a report that recommends specific energy improvements for your house along with cost figures for making the improvements and estimated energy savings. You apply for financing through NYSERDA’s loan origination contractor, Energy Finance Solutions.

Once you are approved, you will sign a Note and a Short-Form Mortgage, both describing the terms and conditions of the financing, and authorizing a NYSERDA Loan Installment Charge to be placed on your utility bill once the project is complete.  Once the contractor has completed the improvements at your house to your satisfaction, the lender will pay the contractor’s bill and alert your utility. Your utility will not begin billing you for the work and you will not owe any principal or interest until June 2012. As you pay off the loan through your utility bill, the utility passes your payments to NYSERDA so they can be put back into the revolving loan fund for other borrowers.

3: Why does the homeowner have to sign a mortgage?

The legislation requires a mortgage to ensure that a future purchaser of the home will be informed of the NYSERDA Loan Installment Charge. The homeowner that signs up for an On-Bill Recovery Loan also signs a Mortgage, which will be recorded like a normal mortgage.  There is no fee or mortgage tax paid by the borrower for this filing. The mortgage is subordinated (ranks after other debts) to any current or future mortgage loan on the property and can’t be used for foreclosure or to force payment.

4: When does the On-Bill Recovery Loan Program start?

For owners of 1- to 4-unit residential homes, it begins January 30. For small businesses, not-for-profits and multifamily buildings, it will begin sometime before May 30, 2012.

5: What home improvements does it cover?

For residential homeowners, it covers home improvements that increase the energy efficiency of the home and meet Home Performance with ENERGY STAR and On-Bill Recovery Loan Program standards. To participate in the On-Bill Recovery Loan program, the homeowner must have a comprehensive energy assessment conducted by a participating Building Performance Institute (BPI)-Accredited Home Performance contractor, and home energy improvements must be recommended and installed by a participating Home Performance with ENERGY STAR contractor. In addition, on an annualized basis, the monthly on-bill repayment amount can not exceed one-twelfth of the savings projected to result from the installation of the energy efficiency measures and the repayment term may not exceed the useful life of the improvement.

Eligible home energy upgrades typically include insulation and air sealing; energy-efficient furnaces, boilers, water heaters, air conditioners, lighting fixtures and and appliances.

Eligible improvements for small business, not-for-profit and multifamily buildings are listed on NYSERDA’s website.

6: Is there a maximum income level to participate?

No.

7: Will consumers really see no increase in their energy bills because the financing of energy improvements will be offset by their energy savings?

The loan will be designed so that projected energy savings equal or exceed payments.  However, these energy efficiency projects may not result in lower monthly costs over time, due to additional factors that contribute to monthly energy costs.  Energy bills vary monthly due to pricing, weather and energy use. Therefore, some months your energy bills may be smaller than they would have been without the energy savings, and other months they may be larger.  Also, customers may change their energy use habits over time and this may result in changes in energy bills.

8: How much is the maximum amount of the loan?

A homeowner can finance up to $25,000 if the payback period (the amount of time it takes for the work to “pay for itself” in savings) is 15 years or less. If the payback period is longer than 15 years, the maximum amount eligible for financing is $13,000.

9: What are the financing terms?

The interest rate for a residential On-Bill Recovery Loan is 3.49% for terms of 5, 10, or 15 years.  Once approved for the loan, the consumer’s interest rate is fixed for the life of the loan. Residential applicants will also be charged a loan processing fee of $150 by Energy Finance Solutions, which can be included in the amount financed.   The loan term cannot exceed the useful life of the improvements.

10: Will unsecured loans through Green Jobs/Green NY still be available or do consumers have to use On-Bill Recovery to get a loan from NYSERDA?

Yes, unsecured loans through Green Jobs/Green NY will still be available. On-Bill Recovery Loan is just another payment option.

11: What are the credit standards?

For 1- to 4-unit residential homeowners, applicants must have:

  • a credit score of at least 640 (alternatively, a demonstrated history of satisfactory energy bill and mortgage payment); 
  • acceptable levels of income relative to outstanding debt obligations; 
  • no bankruptcies, foreclosures or repossessions within the past 7 years (5 years if demonstrated history of satisfactory energy bill and mortgage payments); and 
  • not more than $2,500 in outstanding collections, chargeoffs, liens and judgments. 
Credit standards are still being developed for small business, not-for-profit, and multifamily (larger than 5-units) building owners.

12: Will NYSERDA have a list of participating lenders on the NYSERDA web site?

Initially the lender is Energy Finance Solutions. Consumers can contact them by going to nyserda.ny.gov/residential  for the loan information.  An online credit application will be available on January 30 for the On-Bill Recovery Loan. NYSERDA may issue a solicitation for additional lenders in 2012.

13: What utilities are participating in On-Bill recovery?

The law requires that the following utilities participate: Central Hudson, Con Edison, Long Island Power Authority, National Grid (upstate), New York State Electric and Gas Corporation, Orange & Rockland, Rochester Gas and Electric..

14: Can you participate in the On-Bill Recovery Loan Program if you are a renter?

For residential properties, the borrower must own the property in addition to being named on the utility account. For small business, not-for-profit, and multifamily buildings, the borrower must be named on the utility account, but does not have to be the property owner – they can qualify for an On-Bill Recovery Loan if they have written authority from the property owner to make and finance the energy efficiency improvements in the property.

15: Can you get the work done and do on-bill if you are planning to buy the house but don’t own it yet?

No. You must own the house.

16: Does the homeowner have to use certain contractors to participate in On-Bill Recovery?

Yes. For single family homes or 2- to 4-unit residential properties, the homeowner must use a company that is accredited by the Building-Performance Institute and participating in NYSERDA’s Home Performance with ENERGY STAR program.  A list of eligible contractors is on the NYSERDA web site at nyserda.ny.gov/residential .

For small business and not-for-profits, the owner must use a NYSERDA or utility program approved installer.

17: When does the homeowner need to start paying back the loan?

Residential customers who apply for financing prior to June 2012 will not be charged on their utility account until the first utility billing period ending after May 31, 2012. No payments are due and no interest will accrue during this deferral period.  Otherwise, payments begin within one or two utility billings after the contractor has completed work.

18: Who pays the contractor?

Loan proceeds from the revolving loan funds will be used to pay the contractor.  The payment will be made by EFS.

19: Can do-it-yourselfers participate in the On-Bill Recovery Loan Program for the cost of equipment and materials?

No. Consumers must use a BPI-accredited/NYSERDA approved contracting company to do the work.

20: What happens if the homeowner doesn’t pay this portion of his/her utility bill?

This charge is subject to the same terms and conditions as your normal utility service costs -- non-payment is subject to late payment charges, and can ultimately subject you to termination of electric/gas utility service in the same manner as non-payment of your utility charges.

21: Is there a penalty for pre-payment?

No.

22: Is there a minimum loan amount for an On-Bill Recovery Loan?

Yes. The minimum loan amount is $3,000 for most residents and $1,500 for those participating in Assisted Home Performance with ENERGY STAR, a program for residents with incomes between 60% and 80% of state or area median income, whichever is higher.

23: Does the homeowner have to pay off the loan if s/he sells the house?

No. The loan is transferable to the new owner unless the parties agree that it will be fully paid prior to transfer.

24: Are interest payments tax deductible?

Interest payments may be tax-deductible; consumers should consult with their tax advisor(s).  Interest rates for new loans may be subject to change in the future.

25: How will On-Bill Recovery Loan Program affect oil and propane customers?

They are eligible for the On-Bill Recovery Loan program. The cost of energy improvements will be on their electric bill. Their electric bill will, therefore, increase and savings will be found on their oil or propane bill.

26: When did the On-Bill Recovery Loan program law pass and what was its purpose?

The bill was passed by the New York State legislature in June 2011 and signed into law by Gov. Andrew Cuomo on August 4, 2011. Its purpose is to provide a mechanism to encourage New York homeowners and businesses to make energy-efficiency improvements to their homes and businesses in order to reduce energy consumption and carbon emissions.