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Your Home: Is 'going green' worth the cost?

The eco-friendly house (and renovation) has gone mainstream. But is it really worth the cost?

By Sarah Max, Money Magazine contributing writer

(Money Magazine) -- Jason and Kelly Joseph don't drive a hybrid car. They don't shop exclusively in the natural foods aisle. And they don't lose sleep worrying about global warming.

But their house, a 2,800-square-foot Craftsman near Grand Rapids, would make the Environmental Defense Fund proud.

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Jason and Kelly Joseph, with son Alex, love the money-saving benefits of their new 'green' house.
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The walls are insulated with draft-stopping foam; the floors are covered in wood from a sustainable forest; and the rooms are decked out with nontoxic paint, just to name a few of its earth-friendly features.

The Josephs weren't planning to go green. But when their builder described the benefits - lower heating and cooling bills and better indoor-air quality - they agreed that it was worth adding $10,000 to their total tab.

"If you're building a house as a lifelong investment, it just seems like the right thing to do," says Jason, 32. And only a year after the house was completed, many of the upgrades are already beginning to pay for themselves, he notes. "Our friends' energy bills were almost double ours last winter."

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A decade ago most people associated environmentally-sound home building with unsightly solar panels and bad water pressure. That's no longer a worry.

Today the majority of houses that meet the U.S. Green Building Council definition of a "green" home - one that uses less energy, less natural resources and fewer toxic chemicals - are indistinguishable from their traditionally constructed neighbors. And any counter cultural philosophical baggage is long gone as well.

As with hybrid cars and organic food, interest in eco-friendly building and renovating has spilled over to the mainstream. "We're seeing a lot of demand, particularly on the high end of the market," says Jerry Howard, CEO of the National Association of Home Builders (NAHB).

And some 90 percent of people surveyed by the American Institute of Architects in 2006 said they'd be willing to pay $5,000 more to build or buy a house that would use less energy or protect the earth.

"Green is the new black," quips Maggie Wood, an environmental designer in Jamesport, N.Y.

Of course, environmental consciousness comes at a premium. Green construction techniques and sustainable building materials can add anywhere from a few hundred dollars to a few hundred thousand dollars.

Whether that extra cost makes sense for you in the long run depends in large part on what you hope to get out of a green home in the first place.

Why go green?

Homeowners and buyers have all kinds of reasons, although these, alone and in combination, tend to be the most common:

You can save energy - and money Given the astronomical rise in fuel prices in the past few years, it's no surprise that energy efficiency is the top reason consumers choose green building these days.

Traditionally constructed homes, while far more energy-efficient than those built in past decades, can still squander a mind-boggling amount of fossil fuel. The typical house loses 15 percent to 20 percent of its heat or air-conditioning leakage from ducts alone, according to Energy Star, a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy.

Energy-conscious construction can significantly reduce that waste. Some of the savings come from materials that provide extra thermal resistance, such as straw-bale construction and insulated concrete forms. More can come from designs that maximize exposure to winter sun and minimize summer heat.

Green builders and remodelers also favor energy-efficient appliances and water-conserving fixtures. Energy savings from all these techniques usually pay for their higher up-front costs in two to seven years, says Elliot Johnson, an Austin architect specializing in this type of design.

Solar power is a different story. Alex Wilson, author of "Your Green Home," explains that panels are expensive to install and take years to recoup their costs in electricity savings. "If you've done everything else you can to conserve energy, then it makes sense to look into generating your own power."

You can save your lungs Compared with outdoor air, indoor air can be two to five times more polluted, according to the U.S. Environmental Protection Agency.

A major cause: volatile organic compounds (VOCs) commonly found in paints, stains and glues. When these products dry, they release chemicals and continue to do so for years. This can exacerbate allergies and asthma, and cause headaches and nausea.

As a preventive measure, some homeowners opt for "low VOC" paint, natural stains and formaldehyde-free glue, which generally cost a few dollars more per container.

Providing adequate ventilation can also improve air quality. "Years ago the air would turn over naturally because houses were so poorly insulated, but today houses are so tightly sealed that you need to circulate fresh air," says Jeff Wassenaar, president of Legacy Homes, which built the Josephs' house.

One solution: adding a mechanical ventilation system, which can run between $500 and $2,000.

You can help save the planet The final reason you might choose this type of construction is less practical and more philosophical: You want to leave the smallest footprint you can on the planet.

That means planning construction to minimize the waste of building materials; reducing water consumption by adding low-volume toilets or rainwater filtration systems; and working with products that are sustainable (wool carpeting, bamboo flooring, cotton insulation) or recycled (salvaged wood, steel made with reused rebar, insulation made from paper products).

Will it pay off?

If you were to build a house as green as you possibly could, it might cost you 20 percent to 30 percent more than traditional construction. But that would imply an extreme sense of environmental duty.

"Most of our projects cost between 2 percent and 4 percent more than standard construction," says Wassenaar.

There are also some significant tax credits available on the state and federal level that may help pay for improvements. You can claim a credit of up to $500 on your 1040 for installing energy-efficient windows, insulation, doors, roofs, boilers and air conditioners, for example. (Log on to ase.org and click on Consumers for more on this.)

Before you invest in these, however, you might want to consider whether your monthly utility savings and any tax breaks will pay for the added cost in a reasonable amount of time. Assuming a $400,000 house with a 6.5 percent, 30-year fixed-rate loan and $80,000 down, your monthly payment would be $2,022. Add $10,000 of energy-efficient features to that and your payment goes to $2,085.

For you to cover the higher mortgage payment and recoup the up-front costs in seven years, your monthly energy savings would have to be $182. Add $20,000 and your payment goes to $2,149 - and you'd need to save $365 monthly.

In terms of resale value, green homes have come a long way. These days most do not telegraph their eco-friendly features; from the outside they look like any other house on the block. You won't necessarily get a huge premium for your abode's environmentalism, says John Bredemeyer, president of appraisal company Realcorp in Omaha, "but it will likely sell at the upper end of the range and quicker," as it will have something more going for it than an equivalent traditional construction.

Where to go for more information

"There are many contractors who say they do green but don't know what they're doing," says Johnson. To make sure that you're not getting a builder who's "green" on the concept:

Contact a local or regional green building group These organizations can be found at usgbc.org/leed/homes. They can connect you with environmental architects and builders and inform you about techniques that work well in your climate, as well as tax credits offered in your area.

Ask contractors about the criteria the follow Then request a copy of the guidelines to make sure you know what you're in for. The U.S. Green Building Council, whose LEED rating is the gold standard for commercial green building, plans to launch a residential rating program this summer.

Meanwhile, the NAHB publishes guidelines (available at nahb.org, under Publications) that cover everything from lot preparation to water conservation; many local organizations also rate homes on a checklist of practices.

Ask to see examples of their work And talk to the homeowners to see how happy they are with the results. Most are eager to show off their home's earth-friendly features.

Jason Joseph certainly is: "When friends and family come to our house for the first time, I take them to the basement to show them the insulation and ventilation," he says. "A lot of people don't even know this stuff exists."

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.