6 Tips to Solar Loans and Energy Efficient FHA Mortgages

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Bryan Dornan

Refi Guide Founder

In the old days, you usually had to buy the panels with cash, or lease the solar panels. The lease let you rent the panels and to send any unused energy from the panels back to the utility company. Then you could get a credit on your energy bill which would lower your energy costs.

Today there also are options to get a solar panel home loan, as well. There are a number of options here today, as credit unions and banks are providing more energy efficient mortgage financing options. Many mortgage companies have started to offer the FHA solar loans that are insured by the U.S. government in an effort to promote clean energy efficient measures with homeowners.

Solar panel manufacturers also offer solar loans through some of their installation networks. There are even lending institutions that offer specialized home loans that are made for solar systems.

Solar home loans are similar to other home loans; you can get one just as you might to add an addition to your home. However, one key difference is that a solar loan allows you to own an asset that can greatly improve your energy savings.

Remember, you are not just putting solar panels on the roof to reduce the cost of your electric bill. You also can get a tax credit of up to 30% each year. You also may get rebates and incentives offered by your state and county.

solar loans

The financial rewards have never been greater for homeowners to upgrade in to energy efficiency with solar power systems.

If you are thinking about getting a solar loan, here are some ideas to get the panels financed:

* Consider a PACE loan, which is a Property Assessed Clean Energy loan. This is one that is funded based upon sales of municipal bonds. It is usually offered to homeowners with 15 to 20 year terms. Many states will offer PACE financing options. The terms of this loan can be excellent. The payments may be under the energy savings that you get from the system. You also can probably deduct your interest payments from your taxes.

FHA PowerSaver

* Look into FHA PowerSaver Program for Financing New Energy Initiatives in your house: The FHA solar loans offer homeowners financing up to $25,000 to make energy-efficient home improvements they choose that meet the requirements, including the installation of insulation, duct sealing, doors and windows, HVAC systems, water heaters, solar panels and geothermal systems.

  • Property type: 1- unit, owner-occupied, principal residence properties only.
  • Appraisal requirement: Exterior-only inspection residential appraisal or other FHA accepted method of property valuation.
  • FHA Power Saver insures a lien positioned in 1st place, or 2nd place and also insures energy efficient loan without a lien, as long as the loan amount is not greater than $7,500. When shopping lenders, make sure the company you are speaking with has access to FHA solar loans.

* Also consider a home equity credit loan or HELOC on your home. This is a type of second mortgage or home-equity credit line that uses your equity in your home. You receive a line of credit up to a certain amount, and the interest rate on the credit line is variable. The only interest that is paid is on the money that you have actually taken out and are using.

* Find out if your solar panel company may offer in-house financing. This is very much like when people were buying cars with credit in the 1940’s for the first time. Cars were very expensive, and few could afford to pay for them cash on the spot.

* Credit unions also are offering solar energy loans, and you may be able to get a very low interest rate. Look at Zero Down Home Loans Today.

* Ask your local bank about solar loan options. More banks are offering solar panel loans just like on any type of home improvement. Some banks may offer very low interest rates on these systems, as they are environmentally friendly, and the US government smiles upon these types of systems. Ask your bank if they have any programs that support energy-efficient mortgages.

Solar Loans

Other Considerations 

Regardless of how you structure your FHA solar loan, you will begin to save on your electric bills right away. The 203K loan from FHA may offer you a significant opportunity worth considering. This means that you can start to come out ahead quickly. Why?

The reason is that while you may have higher payments on your home for the solar loan, you will be paying less on your electric bill. The added cost of the loan minus the electric bill savings may mean that you still are saving money.

So, borrowing on a solar loan can be a great deal in terms of your energy savings.

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What to Remember with Solar in the House

There are more options today than a decade ago to finance your solar panel system. If you do a bit of shopping around and you have decent credit, you should be able to find a good solar loan that fits your budget.

6 Reasons to Feel Good about Upgrading to Solar Energy

There are lots of reasons why home owners should convert to solar energy. At the end of it all, the biggest reasons boil down to helping the environment and reducing energy costs. Many of us are aware that converting to solar is a good upgrade for the home that can reduce bills and also increase property values.

Whether you want to upgrade to solar just for the environment or for economics, there are many reasons to feel good about making the switch:

#1 Reduce Your Electric Bills

Everyone wants to reduce their electric bill, right? No matter if you own a home, business or nonprofit, your electric costs can take a big chunk of your monthly budget. With solar panels, you can generate free, green power from your system for its entire 25 years or so life span. Even if you cannot produce all of the energy that you need, you can certainly cut your utility bills substantially.

How much you will save exactly depends upon several factors. How much energy can your system produce? How much do you consume? What part of the country do you live in?

Regardless of these factors, your savings will equal to the costs you are avoiding by switching to solar. So, you will save even more if the rates are higher in your area. Keep in mind that electric prices typically rise over time. So, your savings are only going to rise over the years.

Switching to solar also helps to fix and stabilize your electric costs. This can be a huge help to people who are living on a fixed income in their retirement years.

#2 Earn a Great ROI

Many people view solar panels as an expense. But in reality, they are an investment. The returns in some cases can even rival traditional investments, such as stocks, bonds and real estate. Because of the major electric bill savings, many home owners are able to enjoy paying off their solar panel system in seven or eight years. Solar loans are attractive. FHA solar loans are popular under the 203K program. The ROI in these cases can hit 20%! Thus, you can essentially receive free electricity for the rest of the system’s 25-year lifespan.

Remember that many factors will affect your solar panel ROI, such as:

  • Electricity rates in your area
  • Financial incentives for your state and city
  • Solar renewable energy certificates, if available in your area
  • Cost of the system
  • Technology that is used in your system
  • Characteristics of your property
  • Increases in property value

Another factor – most of the returns that you receive from your solar panel system are savings and are not income. So, you are not going to be subject to federal and state income taxes. Depending upon which tax bracket you are in, your solar system can deliver 20-35% more cash into your pocket than traditional investments.

Plus, you probably will be able to take advantage of numerous local, state and federal tax benefits that encourage people to upgrade to solar energy. For example, the federal investment tax credit or ITC allows the home owner to apply 30% of the cost of the system as a tax credit to your next income tax bill.

Some home owners decide to finance the cost of the system with a solar loan, and the interest can be tax deductible for some customers.

#3 Protect Against Increasing Electricity Costs

A huge advantage of switching to solar at home is that you can hedge against rising utility costs. In the last decade, electricity prices have gone up by 30% or so in many areas. If you invest in a solar energy system now, you can get a fixed electricity rate for part of your bill. This will protect you against increases in your bill in the future.

#4 Boost Property Values

More and more Americans value going solar because it is green and saves on electricity. Many studies suggest that homes that have solar energy systems sell faster than homes that are not so equipped. Appraisers more and more are accounting for solar installations as they value homes when they are being readied for sale.

As more home owners become more educated about solar energy, it is likely that properties equipped with these systems will grow in value over time.

#5 Help the Environment

Solar is one of the best ways to reduce your carbon footprint. Buildings lead to 28% of all of the carbon emissions in the United States. Going solar can put a nice dent in that number. It is estimated that a typical solar system on a home will cut up to four tons of carbon emissions every year. This is like planting 100 trees each year!

#6 Create Jobs

The Solar Foundation estimates that the solar industry has added jobs to the US economy 12 times faster than the overall economy in the US. This accounts for 1.2% of all jobs added in the US. This strong growth is going to continue in the future.

Note that these jobs pay well and cannot be outsourced, so you are helping your community’s job market by switching to solar.

The Bottom Line on Solar Home Loans

When you consider these six benefits of switching to solar, it becomes clear that it often can be a great move for the home or business owner. We recommend that you talk to your solar system provider today to see if a system will work for your building or home.

References: Why Go Solar? (n.d.). Retrieved from  https://www.energysage.com/solar/why-go-solar/

About Bryan Dornan

With over 20 years in the mortgage industry, Bryan Dornan has started several companies, such as the Lead Planet, Mortgage Lenders Plus and the Refi Guide. Mr. Dornan has written hundreds of finance related articles in an effort to promote home-ownership to consumers across the United States.