Equipment loans for residential solar

Have a sunny roof but don’t have the upfront cash to get rooftop solar? You’re not the only one.  In February, we wrote about whether you should buy or lease a system.

And recently came across this list of banks & lenders who offer unsecured (not home equity) loans for equipment.

Of note are these: Admirals Bank ~ EnerBank USA ~ Green Sky Credit ~ Home Loan Investment Bank ~ Lightstream ~ Provident Credit Union ~ SunPower Corporation ~ Sunnova Energy Corporation

If you’ve used any of these lenders to fund a solar installation, please write us and share your experience for others in Greater Philadelphia!

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Roofs and Rooftop Solar and the Federal Tax Credit

One issue with installing rooftop solar is the pre-existing condition of the roof.

Even though rooftop panels extend the life of a roof, it’s better to begin with a roof that’s newish, or in good condition. So, in the past few months, several people ended up calling in a roofer while we were together analyzing their solar proposals.

Some of these people have decided to tackle the roof first, and the solar

Image credit: nhenergychoices.com

panels… maybe the following year. Some other people asked us… since there’s a 30% federal tax credit for rooftop solar, could this also apply to the roofing job?  The answer is “maybe.”

The page explaining the Residential Renewable Energy Tax Credit does not specifically mention roofs. It states that “expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home.” Some people consider the new roof, or some part of it, to be on-site preparation.

To obtain this credit you need to fill out IRS Form 5695. Instructions for Form 5695 Residential Energy Credits states that:

Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. The home doesn’t have to be your main home.”

Not very clear, we agree. One of our co-op members called up his accountant who interpreted the above as…If there’s a structural concern with installing panels on a roof; or there’s a prerequisite repair before the panels can go up; and both jobs are within a reasonable time frame, which we interpret to be within a month or so of each other; then the cost of the roof repair could also, in effect, be reduced by 30% from the tax savings.

As to whether the whole roofing job, or just the area beneath the panels is eligible, we suggest using your own judgement when filing. Be reasonable.

Image credit: maximumwindowprotection.com

If in doubt, please check with your tax advisor. And know that we are not tax advisors, and therefore not liable for this advice.

In this member’s case, the roof didn’t need to be replaced. And he will happily get to include the repairs along with the solar job when he files his 2017 returns.

Currently, we get to reduce our taxes by 30% of the cost of a solar installation. Know that the longer you wait, the more likely that this encouragement will disappear. Here you can see a timeline for the tax credit for homes with solar electric installations, also known as photo-voltaic systems.

  • 30% for systems placed in service by 12/31/2019
  • 26% for systems placed in service during 2020
  • 22% for systems placed in service during 2021
  • No plans yet for systems placed in service after 2021

Get ’em while the tax credit lasts…

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Financing residential solar

When deciding on residential solar installations, people often ask whether it’s better to own or lease the project.

We’ve found it best to own the project outright, paid from personal savings. A home equity loan is next best, and for those who may not have equity in their home: an unsecured loan.

To get rooftop solar with no money down, there is an option to lease which used to be the best option when solar projects were more expensive. Though this could still work for some people, we are not keen on it because a large portion of the savings goes to the solar installer / financier rather than the homeowner.

 

Personal savings

Paying for solar installations from personal savings is typically the best option, since savings account rates are typically well below 1%, while the return on investment for residential rooftop solar in Pennsylvania is about 11%, with a payback period of about 10 years.

Home Equity Loans

In the Philadelphia area, Washington Savings Bank and Ambler Savings Bank had the best home equity loan rates (about 3.5%) when one of our members checked a few weeks ago for 10 year home equity loan rates. Dollar bank, based out of Pittsburgh, offered home equity loans at 3.54%.

Unsecured Loans, not tied to Home Equity

Looking at bankrate.com’s page on Home Improvement Loans,  we learned that “Using personal loans for home repairs can be done without depleting your home equity.” Sample projects have solar installations alongside kitchen remodel, deck & fence projects.

We also learned about the PowerSaver Program, a Federal government supported program that will guarantee loans up to $25,000 from a list of 18 banks and/or credit unions. Currently, the lenders participating in this program include:

Admirals Bank – AFC First Financial Corporation – Bank of Colorado – City of Boise, Idaho – Energy Finance Solutions – Enterprise Cascadia; HomeStreet Bank – Neighbor’s Financial Corporation – Paramount Equity Mortgage – Quicken Loans – SOFCU Community Credit Union – Stonegate Mortgage Corporation – Sun West Mortgage Company – The Bank at Broadmoor – University of Virginia Community Credit Union – Viewtech Financial Services – WinTrust Mortgage – W. J. Bradley Mortgage Capital Corporation

According to the Federal Housing Administration (FHA) website:   “PowerSaver loans will only be available to homeowners who have the wherewithal and motivation to make energy improvements to their home. Borrowers must have credit scores of at least 660 and their total debt to income ratios cannot exceed 45 percent. The combined loan-to-value ratio for all loans on a home, including the PowerSaver loan, cannot exceed 100 percent.”

We have a local installer as well as a local customer who have worked with one of the above banks: Admirals Bank, whose Renewable Energy Lending program, especially the Solar Step Down program sounds quite interesting. 

Solar Loan Superior to a Car Loan

Local bankers have told us that they offer unsecured loans for cars but not for a solar installation. Why? They tell us that a car is collateral; i.e. they can roll it away if someone doesn’t pay the loan.

We say the car is devalued the day it rolls off the dealer’s lot, whereas photovoltaic systems systems don’t lose value. Oftentimes, rooftop solar increases a home’s resale value by about $15,000. Rooftop solar projects also don’t take a bite out of the household budget, like a car does with insurance, registration and fuel costs added onto the purchase cost. Instead, a solar installation helps to reduce a household’s energy bills in the long run.

 

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