If you are fortunate enough to be able to pay cash for a solar installation, then you are one of only a few. You will reap the benefits of the best Return on Investment because you will not be charged any interest.
If your goal is to completely eliminate your electric bill, then you have many options if you are considering financing your solar installation.
Financing falls under 2 main categories: secured and unsecured. There are also some creative ways to pay for your solar panels, such as solar leases and on-bill financing (in certain areas).
Any loan that is tied to your property with a lien is considered secured financing, such as a mortgage or equity line. You can get very good interest rates because lending institutions consider these types of loans lower risk. If you are considering secured financing, I would start with your own bank or credit union where you have a personal or business relationship.
Unsecured financing is where a bank lends you money based solely on your credit and ability to repay the loan. The bank’s only recourse is reporting late payments to your credit report.
Secured Options:
- Cash-out refinance
- Home Equity Line of Credit (HELOC)
- HUD and FHA loans
- Energy Efficient Mortgage
Unsecured Options
- Home Improvement loan
- Signature loan
- Credit Card
Solar Lease or Power Purchase Agreement (PPA): Solar leasing has become very popular recently. Many solar installers offer this sort of financing now. Personally, I recommend a solar lease only when all other financing options have been ruled out.
Leases usually carry between a 10-20 year amortization. It allows you to finance your solar panels, but you will always have a lease payment. Many leasing options also carry an accelerator so your payment goes up every year. Many homeowners question what happens after the lease period. Ask your solar installer for a copy of the contract before you sign anything.
Property Assessed Clean Energy (PACE): The PACE program sounded like a great idea until Fannie Mae and Freddie Mac squashed it. The original plan was to have your solar panel installation financed through your property taxes. It would take first lien status and this made the Feds nervous. The interest rates were not that competitive, so an unsecured loan might have been a better option anyway.
On-bill Financing: Some utilities offer On-Bill Financing, where the energy company actually finances the solar panels and the payment is billed on the utility statement. Many solar installers are pushing this, but legislation needs to pass before the utility is required to offer it.
If you are interested in getting a proposal for a solar panel installation, click here and we will have 3 pre-verified solar installers give you a free energy analysis and solar quote. They can also help you secure financing.
