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.
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.
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.