How to Finance Your Rooftop Solar Energy System

by | Sep 14, 2022 | Energy News | 0 comments

As more Americans explore converting their homes to use solar power, many homeowners are thinking about costs. Today’s residential solar installation prices range from $15,000 to $35,000, depending on factors like your roof, where you live, and how much electricity you want your system to produce. The Lawrence Berkeley National Laboratory’s Tracking the Sun

report contains solar costs across the country.

Most homeowners don’t pay the full cost of residential solar, thanks to federal and state incentives. The federal solar investment tax credit (ITC) is 26% of the total cost of a home solar system installed by December 31, 2022. Many states offer tax credits and incentives that can help bring the cost of owning a solar system within reach. Visit the Database of State Incentives for Renewables & Efficiency (DSIRE

) to find out what’s available in your state. Municipalities and utilities also offer incentives, so ask around to see what’s available where you live.

If you don’t have the cash to purchase a system upfront, you can obtain a loan or lease a system. Here are your solar financing options:

  • Loans –You can obtain a loan to purchase a system. Loan options, including zero-down financing, are available through some banks, credit unions, and solar installers. There are several types of loans:
    • Personal loans offer fixed interest rates and monthly payments, so you always know how much you’re paying. You can take out a long-term loan to pay off the cost of your solar installation over many years, but there are also short-term (12-18 months) loans, also called bridge loans, that allow you to use the ITC and state credits immediately instead of waiting until you file taxes. In fact, you can combine this short-term loan with a long-term loan that covers the remaining cost of your installation.
    • Residential property assessed clean energy (PACE) loans – Some states allow loans that can be tied to your property, enabling you to pay your loan back as part of your annual property taxes. If you sell your home, the loan will transfer to the home buyer.
    • Home equity loans work like personal loans, with the fixed interest rates and monthly payments, but they let you borrow against your home.
    • Home equity lines of credit, like credit cards, offer lines of credit you can borrow against, but they often come with variable interest rates, so you can expect the amount you pay to change in time.
    • Government loans can help current as well as new homeowners. If you own a home now, Fannie Mae’s HomeStyle Energy Program enables you to get solar panels and other clean energy upgrades up to 15% of your property’s value. If you’re purchasing or refinancing a home, the HomeStyle Energy Mortgage Program

and the Federal Housing Administration’s Energy Efficient Mortgage Program

  • can help you install solar panels at the same time.
  • Lease –Like leasing a car, you can lease a solar energy system to reduce your upfront expenses. Under this arrangement, a solar installer, finance provider, or other third party  owns and maintains the system you put on your roof. You will pay a fixed monthly rate to the company that owns the system. Check with your insurance company to see if your policy covers leased panels. A lease is typically 20-25 years. If you sell your house, the way the lease gets transferred to the new homeowner will be determined during the sale.
  • Power purchase agreement (PPA) – This is a lease by another name. The difference is how much you pay and to whom. Under a solar PPA, you purchase the electricity generated by your system back from the system owner at a set rate per kilowatt-hour. PPAs are often offered with no money down, so you can quickly see immediate monthly savings on your energy bill. Ask whether your PPA raises the price you pay over time, and factor the answer into your financing decision.

Note that if you lease or have a PPA, you are not eligible for the tax breaks and incentives available to buyers, but you will save money on energy in the long run and lower your carbon emissions.

If you own a system outright or through a loan, and you decide to sell your home, you can transfer the system’s ownership to whomever buys your home. A residential solar energy system may increase your home’s value: In 2019, Zillow found that homes with solar panels sell for about 4% percent more than comparable homes without solar, which can add thousands of dollars to your price if you sell.  

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