What are my financing options?
There are great financing options for anyone that qualifies for a solar system these days. The first question you should be asking yourself is what your goal is by going solar. Are you trying to just save money on your utility bills, or are you interested in investing in an asset for your home?
Solar Power Purchase Agreements (PPA) & Leases
Through a solar PPA or lease product, the system is owned by a third-party finance company, and the homeowner essentially purchases the power from the solar on their roof, usually at a discount compared to what they’re paying their utility company.
With leasing and PPAs you get the financial and environmental benefits of solar energy without the costs associated with ownership. You get locked into fixed rates per the contract, so as the local utility rates increase, your solar rates are protected and you save more money.
You also don’t need to worry about monitoring, repair and maintenance costs - the system owner will handle that. However, you won’t be eligible for any of the tax credits, rebates, or incentives that come with ownership.
Leases & PPAs typically last 20-25 years and allow you to use all the energy you need at a fixed monthly payment rate.
If you decide to move or sell your home before these contracts expire, you’ll be responsible for transferring the lease or PPA to the new buyer, or purchasing the solar panels at market cost.
Financing a solar purchase through a loan is a great way to reap the benefits of owning the system outright without presenting the upfront cash you would need to buy the equipment. There are both secured and unsecured solar loans available.
Home equity loans are the most common financing option when it comes to paying to own. The terms usually range between 7-25 years, and the interest you pay is tax-deductible. Fortunately, you are also able to take advantage of the solar ITC, a tax credit that is currently set to scale back over the next several years. If you were ever to default on this loan, it would be the same as defaulting on a mortgage.
FHA, Title 1 loans similarly use your home as collateral, have 7-25 year terms, and have tax-deductible interest. Under this scenario, the loan is guaranteed by the government. As a result, if you default on this loan, if and when you choose to sell your home, the loan gets paid from the revenue.
Unsecured loans are very risky as you don’t have to present any collateral. But beware: interest rates are higher and aren’t tax-deductible. If you default on this loan, your credit score will be negatively impacted. These loans are rare in the solar industry.
Buying your System with Cash
If it’s in your budget to pay upfront for the entire system with cash or a check, you’ll benefit from some savings on the system that can be pretty significant. In this case, you’re eligible to receive all the tax credits, rebates, and federal and state incentives that can make owning your own solar power system an attractive investment.
If the system you purchase covers 100% or more of your total energy usage, you can look forward to slashing your energy spending to almost $0 for the life of the equipment, which is on average 30+ years.
You’d be responsible for setting up a system for monitoring & maintenance for your panels, usually done with the installer that does the original project for you.