All You Need To Know About Solar Home PACE Financing

By Isaac Ost
08 March 2018
Property Assessed Clean Energy PACE

As the cost of solar goes down year by year, more people are finding that a home solar panel system may be the right decision for them.

Although home solar is at its cheapest point, it still can cost a homeowner tens of thousands of dollars. This is why financing and federal incentives are still absolutely necessary to look into. Here's our comprehensive overview of third party financing options

PACE Financing for Solar

One area of solar home financing includes the Property Assessed Clean Energy (PACE) programs. These programs help assist both residential and commercial property owners in financing their solar panel systems. More specifically, the PACE model is focused on general energy efficiency and renewable energy improvements, therefore this financing is not just limited to solar systems.

PACE programs enable state and local governments, or other authorities, to fund the upfront cost of residential and commercial energy projects, and further allow for borrowers to pay their loans back through their property taxes. The way this works is that the new system’s value is applied to their property assessment, and the additional taxes are paid on this new assessment. The extra money coming in from the raised property taxes will allow a borrower to pay their loan back over the course of 10 to 20 years, in most cases.

Each state or local municipality that participates in the PACE financing programs can enact their own legislation to implement these programs in various ways for their constituents. For example, just a few months ago, two new bills were passed in California to increase the consumer protections around borrowers within California’s PACE programs. You can learn more about where PACE financing programs are available at PACENation.

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PACE Financing Advantages And Disadvantages

Now that you have a general understanding of how the PACE financing programs for home solar work, we can take a deeper look at how this program may or may not benefit you.

Advantages

  • Provides secure financing for all-encompassing projects and can extend over a longer period. This helps make projects cash flow positive.
  • The repayment can be spread out longer and this debt no longer must be paid at a sale or refinancing event.
  • May allow for lower interest rates due to the increased likelihood of successful repayments. This is because paying through property tax creates a lower risk.
  • Provides an incentive that encourages better energy efficiency and a higher rate of renewable energy adoption.
  • Makes use of private capital like municipal bonds.

Disadvantages

  • Only property owners can make use of PACE programs.
  • Cannot be applied to investments below $2,500.
  • If the lenders or mortgage holders believe that the assessment amount may go unpaid, they may have some resistance in lending.

Overall, there are more advantages than disadvantages for the PACE financing programs. As long as you own the system that you are installing, it is above $2,500, and you make sure you pay the additional property taxes, you are only going to benefit from the PACE programs.

View our 2018 Solar Starter Guide

The Success Of PACE Programs

PACE financing has been very popular for residential homeowners that decide to install a solar panel system. Since the start of these programs in 2009, there are now over 30 states involved in passing PACE-related legislation, with 19 states already having PACE programs fully operational. Outside of its popularity, PACE properties have also been shown to have lower foreclosure rates and higher energy savings. The value that these programs bring is very evident when looking at the facts and statistics.

A Great Financing Option for prospective owners of solar panel systems, if you also are in a state where the PACE programs are active, this is something that you should definitely look into. Even with the cost of solar dropping significantly, it can still cost you tens of thousands of dollars, and that is why these financing options still bring tremendous value. With the ability to qualify for a low-interest loan that can be paid back through your property taxes, having a solar integrated home is now a much more realistic option for homeowners.

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