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Avoiding the Out-of-Pocket Upfront Cost of Your Solar Installation

We talk a lot about the numerous benefits of a solar installation, as many people are looking into purchasing a system.  Initially there tends to be hesitation before investing in a system.  Along with the substantial financial benefits to owning a system, there can be an upfront cost that concerns a homeowner/business owner initially.  Fortunately, there are countless financing options, some even renewable energy-specific, to assist one getting past the initial out-of-pocket down payment. “Solar panels can save the typical American family over $1,400 in electrical costs each year,” (fool.com).  Finding the best lender for you and your system could allow you to not only better the environment while reaping the benefits of tax credits, state rebates and lower utility bills. Believe it or not, a typical financing scenario will lead to paying lower monthly payments compared to what you already plan to pay your utility.

With so many options available, it is important to consider all the details involved with the loan prior to your commitment.  Credit requirements, loan sizes, loan terms and lengths are all crucial elements to weigh. There are also components to consider such as the ease of access and transparency of loan information, any applicable discounts, and other items such as unemployment protection. Although minimum credit scores are required by most lenders, there are options of personal loans for poor credit.  Applying for that loan and making the investment in a solar installation will save you money, while simultaneously improving your credit score. Not to mention the added value that will be applied to your home. “On average, solar panels raise a home’s value by 4.1% across the U.S., according to a new Zillow analysis of homes across the country,” (money.com). Not only is the money you can expect to pay your utility saved you are also building equity into your home or business.

First, there is the option of a Home Equity Loan or line of credit (HELOC).  This option allows the purchaser to essentially borrow money from their home’s total value, (typically up to 85% of the appraised amount), to finance their installation.  Basically, this is a second mortgage, with the homeowner receiving a sum and paying this back monthly.

The Federal Housing Administration (FHA) also offers an Energy Efficient Loan Program, which, “helps current or potential homeowners significantly lower their monthly utility bills by enabling them to incorporate the cost of adding energy efficient improvements into their new home or existing housing,” (https://www.fha.com/energy_efficient). The FHA also offers a 203(k) loan which is applicable to solar installations.  This enables anyone buying or refinancing a home to roll the price of the solar installation, classified as an “upgrade”, into their new loan for the length of their mortgage.

In addition to secured loans, unsecured loans are an option. Banks and credit unions will typically offer lower interest rates in correspondence with higher credit scores. Unsecured loans tend to involve slightly higher rates but can be approved quicker than most secured loans.

These options allow many more homeowners to enjoy the benefits of being the producer of their very clean energy. The federal tax credit and state rebates still apply even when financing, which has allowed many to remain cash flow positive from day 1 throughout the system’s life. Typically, finding the highest payment you can afford over the shortest amount of time will lower your aggregate interest paid, and allow the solar installation to pay for itself in less time. Adding to that, please always remember that a solar system is an investment.  It will eventually not only pay for itself but will easily exceed the payments you make.  All the while, your utility bills will be lowered, if not eliminated or even refunded, ultimately saving you money while also saving the environment.

 

Resources:

https://www.fha.com/energy_efficient

https://www.thebalance.com/best-solar-panel-loans-5094735

https://www.investopedia.com/best-solar-panel-loans-5113178

https://money.com/home-value-solar-panels/

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