How Can I Finance a Solar Energy System?

How Can I Finance a Solar Energy System?

How Can I Finance a Solar Energy System?


Sarah Lozanova – February 11, 2019

Are you considered installing a solar power system on your home? Do you have concerns about the affordability of a home solar energy system? This article is the second of a three-part series that explores the financial aspects of installing home solar.

In many cases, financing a solar system is a good idea financially, especially if you don’t have thousands stashed away to invest. Depending on the installation costs, the energy production, and the cost of grid electricity, many solar power systems are cash-flow positive from day one. This means that the savings from the solar system are greater than the loan payments. This is the ideal situation because it means you are saving money, increasing your property value with the solar system, and using clean energy. It’s a win-win all around.

However, if the term of the loan is short or you have very low electricity rates, you might pay more in monthly loan payments than your utility bill savings. But keep in mind that manufacturers design solar systems to last more than 25 years. So, you will continue to save money after you’ve paid off the loan.

When looking for solar financing, the same general rules apply as with any other type of loan.

  • A low-interest rate means you will pay less in interest over the life of the loan.
  • A shorter term means the monthly payments will be higher. But typically, a short-term loan will cost less over the life of the loan.
  • Loans are either secured or unsecured. Secured loans use an asset you own as collateral.
  • Consider all the fees associated with the loan, such as origination fees, and not just the interest rate.

Home Equity Loans

A home equity loan allows you to use the equity you have in your home as collateral for the loan. It typically has a fixed interest rate for a set term, and you receive the money in a lump sum. This arrangement functions similarly to having another mortgage on the home, but you may need to have your home appraised. Because the home is collateral for this loan, it is essential that you are able to make the payments.

The interest rate on home equity loans is typically pretty low. The payments are also fixed, so it is easier to budget. According to the IRS, the interest on a home equity loan is tax deductible if it is used “to buy, build, or substantially improve the taxpayer’s home that secures the loan.”

Solar Loans Through the Solar Installer

Many solar panel installers offer financing through a third party. These financing programs vary by the installer, but often offer both a fixed-rate and term loan. The home is not commonly used as collateral and the credit requirements vary by the program.

PACE Financing

Property assessed clean energy (PACE) financing is available in many areas of the United States, and solar energy installations often qualify. This loan enables home and business owners to pay for the upfront cost of a solar system and pay the loan back over time through a voluntary assessment. The loan is associated with the property and not the individual. The loan period is commonly between 10 and 20 years.

Just like shopping around for a solar installer, it’s a good idea to shop around for a solar loan to find the best rates and terms. Finding the best solar loan can make all the difference in being able to afford a solar energy system and save money over time.

Paying For Solar – Tips For Financing a Residential System

Paying For Solar – Tips For Financing a Residential System

Paying For Solar – Tips For Financing a Residential System

Editor’s Note: This blog post is part of the SunShot Initiative’s series on solar and real estate.

After you’ve made the decision to go solar, the next step is figuring out how to pay for it. Assuming you don’t have the cash to buy your solar energy system upfront, like the vast majority of Americans, there are a variety of financing options to help you hitch onto the solar bandwagon and start increasing the value of your home.

A new type of loan is making solar energy accessible to even more people. Fannie Mae’s HomeStyle® Energy mortgage gives borrowers the ability to complete clean energy upgrades up to 15% of the as-completed appraised property value of the home. Borrowers are able to finance energy-efficient upgrades when purchasing or refinancing a home, eliminating the need for a subordinate lien, home equity line of credit, Property Assessed Clean Energy (PACE) loan, or unsecured loan. The mortgage requires homeowners to attain a home energy report in order to show the value gained through energy savings over time is greater than the installation price tag.

The HomeStyle Energy mortgage changes the solar loan landscape. It will encourage solar installation companies to revisit their loan practices, allowing for more competition within the industry and reducing soft costs—such as permitting and installation—for consumers. People buying homes or refinancing mortgages now can have the cost of a solar array wrapped into their mortgages without worrying about higher interest rates.

Learn more.

Energy Investment

Solarponics offers several energy efficiency options other than solar panels. What would you say is the best investment at this time?
On the Central Coast we have a variety of options for our home energy fuel source. Propane cost have been rising aggressively so if you are one of the households held captive by propane then I would encourage you to consider Solar Water Heating. Solar Water Heating can offset up to 70% of your propane costs for heating your water. These systems pay for themselves in as few as 5 years.

Another new option Solarponics is offering is LED light installation and dimmer switch installations. This upgrades your homes lighting and can show savings of 84% compared to your homes incandescent bulbs. This upgrade to your home is both cost effective and can pay for itself in 5-7 years.

Solarponics’ goal is to stay current with all of your homes energy upgrades as well as find ways to offer you the best investment in these unsure times. If you have any questions about these products or any other energy saving products that Solarponics is now featuring please contact our energy analysts at (805) 466-5595 or drop by our learning center at 4700 El Camino Real, Atascadero, CA 93422.