The Best 10 Ways to Purchase Solar Panels

The Top 10 Ways to Purchase Solar Panels 1. Buying Solar Panels Cash Thinking of buying solar panels cash? Smart move! You'll avoid interest and loan fees, and you won’t need to worry about your credit score. And with how long your solar panels are bound to last, you’ll be saving far more money in the long run. 2. Buying Solar Panels with a Loan If you’re ready to go solar but don't have the upfront cash for a once-off payment, solar panel loans are easy to come by. Better yet, there are plenty of solar panel loan options to choose from. The only thing to keep in mind is that a less-than-stellar credit score may limit your choices. 3. Purchasing Solar Panels with a Credit Union Loan If you’re looking to get a solar panel loan, but aren’t sure where to start, look no further than your local credit union! They offer lower fees, higher savings rates, and a personalized touch. Plus, you'll have a better chance of getting approved while enjoying lower interest rates when compared to big banks. As a bonus, you'll even get to vote on the credit union's policies and decisions. 4. Property Assessed Clean Energy (PACE) Loans These government-approved loans partner with private lenders, making it easy for you to pay for your solar panels. No monthly payments are necessary, just a higher property tax bill that is manageably spread out over a set number of years. 5. Home Equity Loan Are you ready to take your home's energy game to the next level with solar panels, but feeling a bit cash-strapped? A home equity loan, also known as a "second mortgage," might be just the ticket to unlock the power of the sun for your home. With a home equity loan, you can borrow up to 80% of the equity you've built in your home, and receive a lump sum of cash to put towards those shiny new panels. Just be sure to pay attention to the terms and interest rates, as missing payments or defaulting on the loan could lead to foreclosure. But with the savings on your energy bills and the added value to your property, investing in solar with a home equity loan is a win-win. 6. Home Equity Line of Credit (HELOC) Think of a HELOC as your own personal piggy bank, but – instead of coins – it's filled with cash. And instead of breaking it open for candy money, you can use it for something a little more grown-up, like solar panels. With a HELOC, you’ll have a revolving line of credit that you can tap into as needed, only paying interest on the amount you borrow. It's like having a secret stash of cash, but instead of hiding it under your mattress, it's secured by your home. And unlike a lump-sum loan, where you pay interest on the entire amount from day one, a HELOC gives you the flexibility to pay as you go. As an example, if you need $35,000 to go solar over the next three years, your interest payments will gradually increase as your loan balance grows. But don't get too comfortable with your panel-promising piggy bank… After a set term of 10 years, the draw period will end, and you'll have to start making fixed monthly payments for approximately 20 years. But hey, at least you'll be saving money on electricity bills with your planet-friendly solar panels! 7. Solar Lease or Power Purchase Agreement (PPA) (Not Recommended) A solar lease or PPA may sound like a sweet deal, but don't be fooled. These agreements often come with an escalator clause that raises the cost of your electricity each year, potentially leaving you paying more for power than if you didn't go solar in the first place. And let’s not forget about the pushy sales tactics and sometimes illegal behavior of some solar companies. And that’s not even the half of it. If you miss a payment, the solar company or financial institute that owns your panels may repossess them or even place a lien on your home mortgage. Worse yet, if you were thinking about claiming those tax incentives, they belong solely to the leasing company. But perhaps the biggest disadvantage of a solar lease/PPA is the long-term commitment. And to top it all off, the cost of the power produced can vary greatly from summer to winter. Instead, consider a levelized payment system through your local utility company. Trust us, it's the smarter choice. 8. Interest-Free Credit Card (Highly Recommended) When you need to pay for your solar panels, this handy financial tool can help you spread the cost with a 0% interest period for up to 22 months, or even 24 months for balance transfers. Just be sure to pay off the balance before the interest-free period ends, or you may end up with higher interest charges. And remember that the more you borrow, the more you'll have to pay back each month. For your peace of mind, you can always set up a Direct Debit to take the hassle out of remembering when to make payments. 9. VA Emergency Efficient Mortgage (EEM) If you’re a Veteran looking to upgrade your home's energy efficiency, an Energy Efficient Mortgage (EEM) program is something to seriously consider. This loan program helps Veterans finance qualified energy-efficient home improvements, meaning you can use it to pay for your solar panels. Imagine having the added comfort of warm sunshine on a cold winter’s day, while also reducing noise and pollution. Not only will you improve your overall health, but your home's resale value could also increase. Of course, there are some cons to consider as well. You'll have to borrow more money to cover the cost of upgrades, and the spending limit is typically around $6,000. It may take years to recoup costs fully, but the long-term savings and benefits are worth it. 10. Refinancing Your Home Refinancing your home to purchase solar panels is a brilliant way to take the solar panel plunge and upgrade your home's energy game. But before you start signing that dotted line, let's talk about the details. Sure, some homeowners may prefer to pay off the remainder of their loan before refinancing, but why not do both at the same time? When you decide to refinance, it pays to be upfront about the solar panels on your property while working with your lender to find the best solution for you. Panels.

January 11, 2023
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By Freddie Avila

Exploring Solar Panel Purchase Options: Top 10 Ways

Empower Your Home with Solar Savings

Discover the best 10 ways to acquire solar panels with informed decisions and cost savings!

1. Cash Purchase

Opt for a cash purchase for solar panels – a savvy choice with no interest, loan fees, or credit score concerns. The long-term savings make it a wise investment. Cash purchases are particularly appealing if you have the financial capacity upfront. Keep in mind that solar panels have a long lifespan, ensuring that your savings accumulate over time.

2. Loan Financing

Embrace solar power with loans tailor-made for solar panels. Find suitable financing options, keeping in mind that credit scores may influence choices. Loans offer flexibility, allowing you to start benefiting from solar energy while paying in manageable installments. Compare interest rates and terms to choose the most cost-effective loan.

3. Credit Union Loan

Navigate solar panel loans smoothly with local credit unions. Enjoy lower fees, higher savings rates, and personalized service, along with a voice in credit union policies. Credit unions often prioritize their members’ well-being, making them a fantastic resource for finding competitive loan rates and supportive financial guidance.

4. Property Assessed Clean Energy (PACE) Loans

Government-approved loans, working alongside private lenders, make financing solar panels manageable through property tax bill increments. PACE loans are an innovative way to finance energy-efficient upgrades, including solar panels, without an immediate financial burden. It’s crucial to understand the terms and conditions, including the repayment structure and potential impacts on property taxes.

5. Home Equity Loan

Elevate energy efficiency with solar panels via a home equity loan. Borrow up to 80% of your home’s equity for upfront solar investment, benefiting from lower energy bills and increased property value. Home equity loans provide a lump sum that you can invest in your solar project, making it a strategic way to enhance both your home’s value and your quality of life.

6. Home Equity Line of Credit (HELOC)

Tap into a HELOC for solar panels – a flexible revolving line of credit secured by your home. While it provides pay-as-you-go convenience, be mindful of interest payments over time. A HELOC can serve as a financial safety net for solar panel projects and other home improvements. Be sure to carefully manage your payments to avoid higher interest costs in the long run.

7. Solar Lease or Power Purchase Agreement (PPA) – Exercise Caution

Approach solar leases or PPAs cautiously, as they might not be as beneficial as they appear. Beware of escalator clauses, aggressive sales tactics, and the potential for missed payments leading to repossessions. Leasing solar panels might provide upfront cost savings, but it could also tie you into long-term contracts with potential downsides, such as rising energy costs and limited financial benefits.

8. Interest-Free Credit Card – Highly Recommended

Use a 0% interest credit card to finance solar panels over a specific period. Pay attention to the repayment period and set up automatic payments for simplicity. Interest-free credit cards can be a fantastic tool for short-term financing, allowing you to spread out the cost of solar panels without incurring additional interest charges. However, be diligent in repaying the balance within the interest-free period.

9. VA Emergency Efficient Mortgage (EEM)

Veterans can consider the EEM program to finance solar panels and enhance energy efficiency. Benefit from reduced utility bills and improved resale value. The EEM program enables eligible veterans to finance energy-efficient improvements, including solar panels, through their VA-insured mortgage. This program aligns with veterans’ goals of efficient, eco-friendly living while also increasing property value.

10. Refinancing Your Home

Refinancing your home to include solar panels is a smart move. Combine this with paying off existing loans and discuss solar panel presence with your lender for the best outcome. Refinancing allows you to optimize your mortgage terms while incorporating solar panels into the overall financial strategy for your home. Carefully evaluate the potential benefits and costs associated with refinancing before making a decision.

BONUS: Energy Efficient Mortgage (EEM) by FHA

FHA’s EEM program supports energy-efficient improvements through FHA-insured mortgages, reducing utility bills and promoting affordability. The EEM program offers an avenue for homeowners to finance energy-efficient upgrades, including solar panels, through their FHA-insured mortgage. This program not only contributes to reduced utility expenses but also enhances the overall affordability of homeownership.

Boosting Property Value with Solar Panels

Every dollar saved on electricity through solar power enhances property value by $20, according to the National Renewable Energy Laboratory. Homes with solar panels sell for about 4% higher, as per Zillow. Solar panels offer not just energy savings but also increased home value! The financial benefits of solar panels extend beyond energy bill savings, positively impacting your property’s worth.

Stay Informed and Join the Conversation

Stay updated with the Utility Resource Guide app and join Home Solar Simplified on Nexdoor for future developments. These resources can help you stay informed about solar industry trends, financing options, and opportunities to engage with like-minded individuals interested in solar energy and sustainable living.

Invest in solar – a smart choice for both your wallet and the environment!

FHA’s Energy Efficient Mortgage program (EEM) helps families save money on their utility bills by enabling them to finance energy-efficient improvements with their FHA-insured mortgage. The EEM program recognizes that an energy-efficient home will have lower operating costs, making it more affordable for homeowners. Cost-effective energy improvements can lower utility bills and make more income available for mortgage payments. Background In 1992, the Department of Housing and Urban Development initiated the Energy Efficient Mortgage as a pilot demonstration in five states. In 1995, the pilot was expanded as a national program. EEMs recognize that reduced utility expenses can permit a homeowner to pay a higher mortgage to cover the cost of the energy improvements on top of the approved mortgage. Under its EEM program, FHA Insures a borrower’s mortgage used to purchase or refinance a principal residence, and the cost of energy-efficient improvements to be made to the home. The borrower need only qualify for the loan amount used to purchase or refinance a home. The borrower is not required to be qualified on the total loan amount with the portion of the loan used to finance energy-efficient improvements. Like all FHA-insured mortgages, the loan is processed, approved, and funded by a lending institution, such as a mortgage company, bank, or savings and loan association. After the mortgage closes, FHA insures the loan to protect the lender against loss in the event of a payment default. Energy Package The energy package is the set of improvements that the Borrower chooses to make based on the recommendations and analysis performed by a qualified home energy assessor. The improvements can include energy-saving equipment, and active and passive solar and wind technologies. The energy package can include materials, labor, inspections, and the home energy assessment by a qualified energy assessor. Energy Efficient Improvements Must Be Cost-Effective The financed portion of an Energy Package must be cost-effective. Improvements are cost-effective when the cost of making them is equal to or less than the money saved on energy from those improvements.

Cost-Effective Test for Existing Homes

Improvements to existing homes are cost-effective when they pay for themselves over their expected life span with energy dollars saved. Worded differently, the money saved in energy bills because of an improvement must add up to the same greater amount than the cost of making the improvement. A qualified home energy assessment will determine whether the improvements are cost-effective. The assessment evaluates the home’s energy efficiency and conducts analysis to assess the potential savings for a variety of improvements.

Cost-Effective Test for Newly Constructed Homes

For newly constructed homes, the improvements are cost-effective when they exceed the standards set by the most recent International Energy Conservation Code (IECC) that has been adopted by HUD for new construction properties. A qualified home energy assessment will determine which improvements exceed the IECC standards. Home Energy Assessment The Borrower must obtain a home energy assessment. The purpose of the energy assessment is to identify opportunities for improving the energy efficiency of the home and their cost-effectiveness. The assessment must be conducted by a qualified energy rater, assessor, or auditor using whole-home assessment standards, protocols and procedures. Qualified home energy raters/assessors must be trained and certified as one of the following:

Building Performance Institute Building Analyst Professional
Building Performance Institute Home Energy Professional Energy Auditor
Residential Energy Services Network Home Energy Rater; or
energy rater, assessor, or auditor who meets local or state jurisdictional requirements for conducting residential energy audits or assessments, including training, certification, licensure, and insurance requirements.

How Much of an Energy Package can Be Financed? The maximum amount of the energy package that can be added to the borrower’s regular FHA loan amount is the lesser of: · A cost-effective improvement to be made (energy package) based on the home energy assessment; or · the lesser of 5 percent of:

the Adjusted Value;
115 percent of the median area price of a Single Family dwelling; or
150 percent of the national conforming mortgage limit.

An FHA-approved lender can access FHA’s EEM Calculator to determine the dollar maximum amount that a borrower can finance for energy improvements. Complementary Energy-Related Programs and Policies:

Section 203k Rehabilitation Mortgage

EEM may be combined with any FHA Title II mortgage, including the Section 203(k) Rehabilitation Mortgage Insurance program. The 203(k) program allows borrowers to finance a variety of home improvements, repair or modernization projects. An Energy Package from an EEM can be layered on top of the improvements to be made under the 203(k) program.

Energy Efficient Homes (EEH)

When the home being financed meets minimum Energy Efficient Home standards, FHA permits the borrower’s qualifying ratios to be “stretched” by two percentage points above the standard limits. This stretch recognizes energy savings and allows a borrower to qualify for a higher loan amount. The stretch ratios permitted for an Energy Efficient Home may be used with any FHA insurance Title II program, including Energy Efficient Mortgages, and Section 203(k) Rehabilitation Mortgages.

Solar and Wind Technologies

Under FHA’s Solar and Wind Technologies policy, borrowers can have a higher mortgage amount in order to pay for the cost and installation of a new solar or wind energy systems. A new solar or wind system must be made at the time of home purchase or refinance.

Weatherization

FHA’s Weatherization policy allows borrowers to finance up to $3,500 to pay for basic weatherization items, such as thermostats and insulation. How to Get an EEM To apply for an FHA-insured energy-efficient mortgage, contact an FHA-approved lender. For More Information Visit the FHA Resource Center to search the FAQs, ask a question or send an email.