So you’re interested in renewable, abundant power? Wanna save the world and a couple of bucks at the same time?
You’re in luck!
Solar has decreased in cost by about 70% over the past decade. With an increase in financing options and government incentives, there are now very few reasons not to go for it.
And making this a reality may be much easier and cheaper than you think.
Did you know: There are options out there that could have you cash flow positive from the first month of installation?
Yup, that’s right. More money in your pocket, from day one.
And cumulative savings thereafter.
Let’s take a look into the world of solar financing options, to help start you on your adventure.
here’s why you should do this…
- There are many options for lending, catering for a wide range of situations
- Many offer 100% financing with 0% down payment
- Many start saving you money from the day of activation
- Potential to cut your electricity bill by up to 75%
- Profit thousands over the life of your system
- Adding solar is one of the most cost effective upgrades to a home due to:
- it being heavily subsidized
- long term, low, locked in borrowing rates
- an increase in property value
- potential tax deductions and credits
Solar Loans Explained
types of financing
Here, we are taking a look at what’s available. Let’s get straight into it.
Enjoy tax credits? What about passive savings? How about adding resale value to your home?
A solar loan can offer these benefits, and then some.
The main attractions to these solar loans are many.
Firstly, with any loan, you are buying the system. Meaning you own it and all the tax credits and incentives that come along with it.
Money in your pocket.
Secondly, being specialists, solar lenders have this process dialled. They have their niche so figured out that they can create more flexibility than other lenders. From offering 100% financing with 0% down payment, to lending with less than perfect credit scores, they are a very popular choice.
Lastly… they collaborate with solar installation companies themselves. This means they do these transactions on the regular, making the process faster, simpler and more streamlined for you.
While they are taking care of business, you can be dreaming about your first e toy.
solar lease & power purchasing agreement (PPA)
These avenues allow those without the capability of borrowing a chance to get into the game. There are notable differences between loans and leases. The most, being with a leased system, you do not own it. The solar company does.
And that changes things on a few levels.
To simplify, the solar company will install their equipment on your property.
And because all the equipment is theirs, they lay claim to any tax incentives, rebates and these funny things called SRECs (Solar Renewable Energy Certificates).
In a nutshell, SRECs are credits that you earn for generating clean energy, amounting to a few hundred dollars a year.
Think of it as a bonus!
That is, unless your solar company owns your panels. Then it’s a bonus for them.
The fundamental difference between a solar lease and a PPA is this:
With this avenue, you are simply renting the equipment to use freely for a set period of time. Payments are made in monthly installments.
The power it generates is yours to use.
A power purchasing agreement differs somewhat.
The solar company will provide and install the equipment on your property, free of charge. You then buy the electricity the system provides, which is sold to you at a discounted rate.
However, it’s not all roses.
Implications can arise when selling your house, as both of these options will be applying a lien against your property. As you don’t own the system, you can’t sell it, therefore it needs to transfer ownership.
Having said that, this isn’t necessarily a con.
It just takes a little understanding that the selling process may require another step.
The addition of these systems saves money…
It saved money for you, it’ll save money for the next folks, too.
Think “glass half full”…
If you already have a mortgage and some equity in your home, there’s a good chance that this option is for you. Many lenders offer remortgaging or HELOC loans (Home Equity Line Of Credit). These can usually cover the entire cost of the system.
If you have locked in a low interest rate on your home loan, remortgaging will see you enjoying the same low rate on your solar set up.
HELOC loans can also be used for 100% financing but come with slightly higher interest rates. This is still generally cheaper than a specialized solar loan.These options will require you to do all of the legwork associated with the loan. With a solar specialist, the installation company takes care of those details.
PACE (Property Assessed Clean Energy) program
The PACE program comes with its share of benefits too. As a government program, it is tailored to finance green upgrades to your property, including solar panels.
Importantly, PACE can cover those with lower credit scores and no money to invest upfront. Your repayments for the system will be incorporated into your property taxes. This option won’t affect your credit score.
It is important to note that with this setup, the loan is against the property, not the homeowner. The whole lein speil applies here, too.
They are easy to qualify for, you get to keep your panels and use all of the energy at no extra cost.
They do come with a higher interest rate than the HELOC.
USDA, FHA, VA loans
USDA (United States Department of Agriculture)
FHA (Federal Housing Administration)
VA (Veteran Affairs)
These programs offer a range of different loan options and structures. They are not primarily dedicated to solar, however they will still finance energy efficient upgrades to your home.
Interest rates with this type of loan can be as low as 1%, with 0% down at 100% financing. The funds themselves come from local lenders, however the loan is backed by the USDA.
They are geared towards average to very low earning candidates and are awarded based on location and income.
The “power saver second mortgage” is the FHA’s loan directed at funding energy focused upgrades to your home. With low interest rates, along with low credit score acceptance, this is another good option to get you into the solar game.
While they are easier to obtain, they do cost slightly more than a USDA loan. This cost comes in the form of increased insurance premiums.
They also need between a 3.5%- 10% downpayment, determined by your credit score.
A VA loan is available to those who have served, or are currently serving in the forces.
Yet another loan not purely focused on the solar industry, they will help fund improvements to your home.
The department will act as your mortgage lender and also back your loan. This allows for extra flexibility in conditions, ending up in 90% of VA loans being downpayment free.
the final thought
The bottom line is this. Solar has now hit the point of affordability and accessibility.
With the vast array of financing options to get you set up, paired with the major benefits of the systems themselves, now is the time to pull the trigger.
Government initiatives will be expiring over the next couple of years. This means less financial incentives will be available to help you get the ball rolling.
Time to get moving…