Understand Your Solar Panel Financing Options
In the face of rising electricity costs from the traditional electricity grid and unpredictable outages, investing in solar for your home is a way to future-proof your home’s energy. You may have heard of different solar panel leasing options and solar panel purchasing options. While leasing solar panels presents a lower upfront cost, purchasing your solar panels gives you so much more control over your solar energy and the savings to follow.
From added property value to decreased utility bills, solar is a smart financial investment. To help homeowners with solar financing, companies like Sunpro Solar will walk you through a number of financing options to make solar more affordable and accessible. Whether a solar lease, or solar loan or direct purchase, each method of solar panel financing has its advantages, so in the content below we’ll explain to you the pros and cons of each option.
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How Do You Pay For Solar Panels?
There are three ways to purchase solar panels: cash, solar loans and solar leasing/PPA.
The benefits of buying your home solar system include greater long-term savings, especially since your system could pay for itself in fewer than ten years. While the upfront costs are the highest, your future energy costs are predictable and the setup that powers your home is already paid for. With federal incentives, local incentives and statewide rebate programs contributing toward your solar installation, owning your energy through solar is more affordable than ever.
When you finance your solar panels through a solar loan, you might experience a zero down payment in some cases but still have some form of monthly payment. The savings over the lifespan of your panels are still less than a direct purchase, but also significant in their own right. Perhaps the best part of this trade-off is that your payments will end at some point, and your electric bill will be greatly reduced or eliminated.
With solar leasing or solar purchase agreements (PPA), you’ll experience a less expensive install upfront with sometimes higher or lower interest rates, while your solar company will be responsible for maintaining your solar system. However, your monthly payments will be relatively high compared to other options and you will have no long-term benefits or cost incentives.
The Types Of Solar Financing Options
Solar Leases and Power Purchase Agreements (PPA)
When you lease your solar panels, you acquire a solar lease or PPA through which you make monthly payments. While solar panels make for significant energy upgrades and home upgrades, leasing the solar panels is only a good if you prefer minimal responsibility. If anything should need to be repaired or fixed, the solar leasing company will send out a crew to perform any necessary maintenance. While solar panels require very little maintenance to begin with, this could be one reason for leasing panels instead of purchasing them.
Compared to other solar financing options, a solar lease does come with it’s share of negatives. For instance, you cannot receive the deductions that come from the Solar Investment Tax Credit (ITC). You have to own your system in order to receive a state or federal tax credit. Also, leasing solar panels means that you do not own them. This means if you decide to move, you will have to contact the solar company to negotiate purchasing the lease or transferring the lease to the new owner.
The Benefits of Solar Leasing
Just because there are drawbacks doesn’t mean there aren’t some benefits. The benefits of solar leasing or solar purchase agreements (PPA) include:
- Lower upfront cost than purchasing with cash.
- Maintenance for the solar system will be the responsibility of the leasing company.
- Monthly electricity bill savings but a higher monthly payment for lease that will offset the savings.
Solar Purchase and Ownership
The easiest method for getting solar power is to simply pay for the installation yourself. In the long run this gives you the highest value for cost savings. Purchasing your solar panels outright also gives you the immediate benefits from solar tax credits, rebates, and lower utility bills. When you buy your solar panel installation upfront, it means that there are fewer third-party financial conditions to worry about. It also makes the timespan to experience the return on your investment even shorter.
The typical payback period for rooftop solar in the United States is four to eight years; depending on the size of your system and the kind of solar panels and other equipment you selected. There are numerous government incentives at your disposal that are designed to help you with the initial expense as well. The incentives will go a long way to improve your home’s energy usage for the lowest cost.
The Benefits of Buying Solar
The financial benefits of buying a home solar energy system with full cash upfront include:
- Higher long-term savings for homeowners.
- Monthly energy bill savings from the first month, with no monthly payment to offset the savings.
- In some states, your solar purchase is tax deductible or exempt from property tax or sales tax altogether.
A solar loan is a loan that is used towards the purchase of a solar power system for your home. Solar loan financing allows you to avoid the steep payments upfront while also giving you immediate ownership of your system. Like a regular loan, it is paid off in monthly payments with an applied interest rate. However, since you are considered the owner of the system, you are entitled to the benefits such as tax credits and rebates.
Since your home will not be tied to the local power grid, you will see a dramatic decrease in your monthly electric bill. Compared to a solar lease, the savings are likely higher because solar loans are typically paid down after a certain number of years, which means lower monthly payments that will be paid off ever faster.
Like most home improvements, solar panels affects your home’s property value in a positive way. When compared to a solar lease, a solar loan applied to your home will likely sell for more and faster, according to studies of home buyers and real estate. And since you’ll receive a higher amount for your home, you could even recover the amount of the loan.
The Benefits of a Solar Loan
The benefits of financing your solar panels with a loan include:
- Low upfront cost depending on type of loan (could be zero upfront in some cases).
- Significant long-term savings.
- Monthly utility bill savings, offset by a monthly loan payment.
- Loan payment will get paid down and eventually disappear.
Incentives for Purchasing Solar
When considering a solar lease, solar loan or direct purchase of solar, there are many different reasons why each financing option works. Arguably some of the best reasons to purchase your rooftop solar system are the abundant financial solar incentives that are available to you. As your solar company, Sunpro Solar will take into account any available incentives to help you cover the cost of solar panels and solar installation.
Solar Tax Credits
When you schedule your free consultation with Sunpro Solar, we will explain to you the different types of tax credits to apply to your solar panels. This includes the 26% Federal Solar Tax Credit(ITC) and any incentives offered by your state. The earlier you buy your solar panels the better, because the 26% tax credit will only be available through the end of 2022. The Solar Federal Tax Credit for homeowners with solar power will drop to 22% in 2023.
State And Utility Rebates
In some states, the state governments and even local utility companies will help to make your switch to solar even easier — with the use of rebates applied to your investment of solar panels. Utility companies are realizing just how fantastic solar panels are, and how much they can benefit everyone. So to encourage customers to go solar, some utility companies are offering solar rebates to help with the cost of switching to solar.
Energy Efficient Mortgage (EEM) Credits
Another option for affordable solar financing is to look into your eligibility for an Energy Efficient Mortgage, also called an EEM. An EEM is a mortgage that credits a home’s energy efficiency into the mortgage. This gives homeowners like you a chance to finance more energy saving measures, qualifies you for larger home loan amounts and gives you an energy efficient home. This home equity line of credit option is available either through the US government, or through an organization such as Fannie Mae. Buyers looking to make energy efficient upgrades like clean energy from solar panels to their current home may also qualify for refinancing options.
What You Need Before Your Free Solar Consultation
When you make an appointment with a Sunpro Solar Specialist, it’s helpful to know the square footage of your roof, the age of your roof as well the square footage of your home ahead of time.
The size of your roof, its age, the level of sun exposure and amount of shade coverage are all things that determine how the solar system will be installed on your roof. A roof with plentiful exposure to sunlight is ideal. Even better, a roof that has an east-west ridgeline with little to no interference from trees or buildings is the perfect place for panels to capture as much energy as possible from the sun. If the space on your rooftop is more limited, there are smaller higher-efficiency panels made to suit your home energy needs.
The size of your solar panel system depends entirely on your energy needs and the kilowatt-hours of power you need your solar panels to produce. If you want to lower your electric bill, the amount of solar panels will be determined by exactly how much you want to lower it. If you just want half your electricity use to be reduced, your solar panel system will probably be smaller. If you want to cover all your electric needs, you’ll probably need a larger solar panel system, which means of course, more solar panels. However, if you have limited roof space you could instead use higher efficiency solar panels. This would mean fewer solar panels, but greater generation rates.
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