5 Solar Financing Options – Choose the Best for Your Home

Are solar panels worth it?

Solar energy is one of the most popular ways to power homes utilizing renewable energy. The ability to place solar on your roof and receive clean, reliable and sustainable energy has been enough to convince thousands of homeowners to make the switch. Others, however, have been waiting to take the plunge because they feel the cost to go solar is just too high and are wondering, are solar panels worth it?

Many homeowners have the false idea that they have to buy the solar system in order to receive its many environmental and economic benefits. In fact, there are many creative ways to get finance for solar panels, some of which require no money at all upfront. By pairing the right type of financing to your personal situation, acquiring solar is easier than ever before.

So, what are five ways that you can finance solar panels for your home today?

  • Opt Into A Community Solar Program
  • Lease The Solar System And Purchase At The End Of The Term
  • Utilize A Secured Solar Loan
  • Enter Into A Power Purchase Agreement
  • Pay For The Solar System In Cash

Opt Into A Community Solar Program

One way to receive the benefit of solar without actually having to have a solar array attached to or adjacent to your home is by opting into a community solar program.

Typically, a large solar array is built miles away from the development of homes. Then, all of the residents of this community have the opportunity to receive some of the solar energy benefits from this much larger array. Your solar energy share from the system is decided by the fraction of the array that you decide to pay for. If you decide to only offset a portion of your electricity usage with solar power, you may only purchase a small share of the array whereas those seeking to power their entire home on solar may bear more of the cost burden. The great thing about community solar is that the solar energy share you purchase is completely up to you. Because the price homeowners would pay per kilowatt-hour is disclosed prior to you opting into the community solar project, there is a great opportunity to save money on electricity if this rate is lower than the current electricity offer found on your utility bill.

Lease The Solar System And Purchase At The End Of The Term

Finance for solar panels can take a variety of forms. One such way is through a solar panel lease. In this business structure, a third party owns and operates the solar system on your home in return for an agreed-upon lease payment each month. The benefit of this is that you are able to receive all of the positive solar panel output for a fixed rate. One policy that helps this work is solar net metering. Net metering is the practice of crediting excess solar generation back to the homeowner if they should produce more energy than their home uses at any particular time. This is done by exporting the excess power to the grid to be used by other utility customers at the time of generation. Groups such as Going Solar or Energy Sage will be able to tell you whether or not you live in a state that has a solar net metering policy. A solar panel lease can also include a provision where you can purchase the solar system at the end of the lease term. This way, you can experience the best of both worlds in that you are able to own the system only once you have paid down some of the value in the form of a lease.

Utilize A Secured Solar Loan

One of the most common ways to receive financing for a home solar system is to get a secured solar loan. A secured solar loan is usually guaranteed based on the equity you already have in your home.

The reason loans for solar panels are considered to be secured is because it is being used to finance solar which is viewed as a 25-year usable lifespan and even up to 35 years for certain brands. Loans can come from a variety of sources ranging from the Property Assessed Clean Energy (PACE) loan authority to USAA home loans. USAA home loans are great because the cost of the solar system can be included in the total purchase cost of the home which can thus lower the overall interest rate you will be playing on the solar system over many years. Additionally, a Home Equity Line Of Credit (HELOC) can be utilized to purchase the home solar system. HELOC’s are when a portion of the equity in your home is loaned back to you in order to make a large purchase. Loans for solar panels that are less than 7% are often seen as a good loan which can easily be paid back over time due to your energy savings. Plus, homeowners can check tax credit eligibility and receive the full 30% tax credit on the following year’s tax bill.

Enter Into A Power Purchase Agreement

A power purchase agreement is one of the ways in which a homeowner can receive free solar panels. The basic premise is that a third party, often a seasoned solar installer, offers to own and operate a solar system on the roof of your home. In return for this, you as the homeowner will agree to purchase all of the renewable energy used from the system over time. The electricity offer, which is paid for the renewable energy used by the homeowner, is agreed upon before signing the agreement to opt into the power purchase agreement. Typically, those living in states with a high average cost of electricity can benefit from this type of business model. Additionally, it should be noted that, because the solar business is the owner of the solar panels, they are fully responsible for all of its maintenance over time and fixing any potential issues. Groups such as Going Solar and EnergySage will be able to give you suggestions of solar installers in your area which will allow you to purchase power from a solar system installed on your house if you are interested in a program that offers free solar panels to homeowners.

Pay For The Solar System In Cash

Perhaps the most ideal option, paying for a solar system outright with cash may have the most benefits. First, it allows you to fully utilize the 30% Investment Tax Credit. You must check tax credit eligibility to ensure that you can, but most homeowners are eligible for saving them thousands of dollars.

Additionally, because you have paid in cash, there will be no interest payments made on the solar system. This means that you will only pay the sticker price of the solar system. Paying too much interest can drastically extend your payback period and lessen the possibility of seeing a large return on investment. Finally, because you outright own the solar system, the value of your home will likely be assessed higher than it would be without a solar installation.

Solar has never been more accessible to homeowners than it is today thanks to a variety of creative financing techniques. Solar panel output has the potential to power your home with clean and renewable energy. It is important to note that not all of the above financing techniques are right for everyone. Instead, homeowners are encouraged to review their own personal financial situation and attempt to utilize the option that best suits their specific set of needs.

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