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.

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 line of credit 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.

* 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. 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.

The Bottom Line

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.

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.