When you think of solar panels most people think of saving money and saving the environment. Both are true, but if you are considering installing solar panels, or purchasing a home with the panels already installed, you should be aware of how it may affect your mortgage.
Financing Solar Panels
Solar panels can be a pricy addition to the home. The average cost of solar panel installation is about $2.80 per watt for a residential unit. For a 5.7 kilowatt set up, that’s about $15,960. There are multiple ways to finance the installation of solar panels. Several local governments offer PACE loans and you could get an installment loan from your bank to purchase the solar panels. You can also lease the panels from the company. All of these however, come into play when you are seeking to sell your home. If you finance the panels through a bank or other loan, that company will put a lein on your home until the panels are paid off. The new mortgage company will require that all leins are paid before they will offer new financing. Most of the solar companies have their lease agreements senior to a mortgage loan. Fannie, Freddie, FHA and VA will not allow a new loan on a property where other leases are senior to their debt.
Something else to consider is if you take out a personal loan, or other installment loan to pay for the solar panels, the mortgage company will include that payment in your debt to income ratios. High loan amount, high payment means less house.
Properties with solar panels the owed outright:
If the seller owns the solar panels are not under lease, or don’t have a loan on them, the new property appraisal must take their value into consideration. The appraiser must acknowledge the existence of the panels and consider them in the opinion of market value. The property must also maintain access to electrical utilities consistent with community standards.
Something else to consider:
Something else to think about is the type of loan the buyer is getting. If you have solar panels on a home you are selling, and the buyer is purchasing the house as a second home or investment property, the solar panel financing may not be transferrable. The guidelines for owner occupied properties, and other purchase types vary and the solar panels may restrict the buyers financing options.
How much will they save me?
One of the main questions related to solar panels is how much money will they save me. The National Renewable Energy Lab (NREL) published a study outlining the savings from residential solar panel installation. Their approach is mainly focused on energy savings. Your individual dollar savings will depend on location and usage. NREL also has a PVWatts Calculator that will help you estimate your annual dollar savings based on your current usage. Have a copy of your utility bill, or an estimate for the new property available to get the best results.
If you are in the market to purchase or refinance a home, please don’t hesitate to call me to discuss your specific situation.