Image source: Canva.com
If you’re thinking about installing a solar energy system on your property, one of the first concerns likely to cross your mind is, “How will I cover the costs?” The upfront expense of solar panels can be significant, but fortunately, there are numerous financing options available to help homeowners make the switch to solar energy more affordable. Among these options, Property Assessed Clean Energy (PACE) financing has become an increasingly popular choice in many regions, particularly for those interested in home energy improvements. PACE financing offers a unique approach by allowing homeowners to finance their solar installations through an assessment added to their property tax bill, making it easier to manage the costs over time. This method not only spreads out payments but also ties the financial responsibility to the property itself, potentially increasing the appeal of solar energy as a long-term investment. By exploring PACE and other financing options, homeowners can find the best solution to make their solar energy goals a reality.
Understanding PACE Financing
For property owners who prefer not to buy solar panels with cash, solar loans, leases, or power purchase agreements are common financing options. Property Assessed Clean Energy (PACE) financing is a unique alternative available in areas where local governments have allocated funds.
Here’s a general overview of how PACE financing works for installing solar panels on your property:
Legislation and Fund Allocation
A county, local, or municipal government passes legislation to establish a PACE program and allocates funds, typically through the sale of municipal bonds.
Funding
Authorized PACE lenders, such as Renew Financial or Ygrene, provide these funds to property owners who want to make clean energy improvements, including installing solar panels.
Repayment
Property owners repay the financial institution through an assessment added to their annual property tax bill.
PACE financing isn’t limited to solar panels. Both residential and commercial property owners can use it to finance new heating and cooling systems, insulation, and other energy efficiency upgrades.
Unique Advantages of PACE Financing
PACE financing offers homeowners a unique way to fund home upgrades, distinct from standard home improvement loans in several key ways:
Repayment Structure
Unlike standard loans that require monthly payments, PACE financing is repaid annually over a fixed term (10-20 years) through an assessment added to the property tax bill.
Immediate Benefits
With PACE financing, homeowners can immediately enjoy the financial benefits of solar panels without any upfront costs. The annual savings on electricity typically exceed the increase in property taxes, ensuring net financial gains from the solar investment.
Transferability
If you sell your property before fully repaying the solar energy system, the remaining balance transfers to the new owner. PACE financing is attached to the property, not the owner, simplifying the transfer process. The new owner benefits from the existing solar panels without needing to negotiate new financing terms.
Credit Considerations
Traditional loans are often based on credit scores, but PACE financing is determined by the property’s tax capacity (its assessed value). This makes PACE a viable option for property owners with less-than-ideal credit, allowing them to enjoy the financial benefits of solar with no upfront costs.
Why Consider PACE Financing for Your Home Now?
PACE financing is currently accessible to homeowners in California, Florida, and Missouri, with legislative frameworks established in 36 states plus Washington D.C. In late August 2015, the Obama Administration introduced initiatives aimed at eliminating barriers to residential PACE financing for single-family homes.
Initially cautious, the Federal Housing Administration (FHA) has revised its stance and is now encouraging municipalities to pursue PACE financing legislation, marking a significant shift in support.
To explore PACE financing options in your area, and to make an informed decision about solar power for your home, compare different financing options available. For more information on PACE programs, you can download the Department of Energy’s fact sheet on PACE financing.
Disclaimer
The information provided herein is for informational purposes only. Please be aware that the solar energy landscape, including technology, regulations, incentives, and market conditions, changes frequently. Therefore, it is essential to consult with qualified experts and professionals before making any decisions regarding solar energy installations or investments. This will ensure that you receive the most current and applicable advice tailored to your specific circumstances.
