Installing solar panels is an excellent option for homeowners looking to decrease their carbon footprint, save on electricity bills, and improve their property value. This justifies why approximately 2.5 million homeowners already have solar panels installed on their properties. Solar panels last for between 15 and 25 years, offsetting a large percentage of your monthly bill.
However, while the price of solar panels has dropped significantly, rooftop solar panel installation still costs thousands, if not tens of thousands. Most homeowners don’t have such amounts to pay upfront for solar installation, often opting for financed options. Even if you have this amount, you should consult with solar energy experts from Solar Cents for a better suggestion.
Purchasing Solar Panels by Cash
Buying solar panels with cash is arguably the most straightforward way of enjoying the benefits of solar energy. Cash payments eliminate interest and loan fees accrued by solar loans and other financing options. You also don’t have to qualify for the credit, and you’ll save more in the long term.
Since you have to fund the entire installation upfront, it will take a while before recouping the money spent on solar panel installation. The payback period is an important determiner of whether paying in cash is a better option or not. Most homeowners take up to 8 years to recoup the costs incurred.
However, homeowners can benefit from federal solar tax credits by paying using cash. Once the panels have been installed, the U.S government refunds homeowners 26% of the costs incurred through their taxes. However, while you will get thousands of dollars back, you should wait until the tax period.
Paying for solar panels in cash is best for homeowners with a solid cash flow and who can manage a large one-time expense.
Financing Solar Panels Purchase with Loans
If you can’t raise the entire amount upfront, you should consider multiple solar loans covering solar installation costs. More lenders have partnered with solar companies or developers to fund solar panel installations. While these loans are increasingly becoming available, they have high fees, and homeowners with poor credit are not eligible.
Financed solar purchase options include;
1. Solar Loans
Cash-strapped homeowners can take a personal solar loan to cover the installation costs. Solar loans are an excellent financing option as they allow homeowners to own the panels without spending and at a low cost than the electricity bill. Solar loans highly resemble solar lease and power purchase agreements.
However, the key difference is that homeowners using solar loans own the solar systems. This isn’t the case with solar lease or PPA. This means that homeowners can receive rebates and solar tax incentives. However, they are responsible for maintaining and repairing the panels.
2. Solar Lease and PPA
Homeowners can also finance their solar installation using solar leases and power purchase agreements. These two options have significantly contributed to the growth and adoption of solar energy in the U.S. Solar leases and PPAs are quite similar in many ways, and most people easily confuse them.
Generally, both solar leases and PPAs involve working with a third party to install solar panels on your property. The third-party company then sells solar energy generated by the panels to homeowners at pre-determined rates. With a solar lease, homeowners pay fixed monthly installments for the contracted period, often between 15 and 25 years. However, the costs are subject to price escalation.
On the other hand, solar PPAs have varying monthly payments subject to the energy produced by the solar panels. The third-party companies charge solar PPAs using a rate determined by the energy produced per kilowatt-hour. Unlike solar loans, third-party companies own the panels and thus maintain and repair the panels until the agreed period expires.
Homeowners don’t own solar panels. Therefore, they can’t benefit from solar incentives and rebates.
3. Government Loans
The federal government also offers several financing options to encourage the adoption of renewable energies. For instance, the Fannie Mae’s HomeStyle energy mortgage allows homeowners to incorporate solar energy costs into their new or refinanced mortgage. The Federal Housing Administration also has similar loans integrated into the mortgage.
The Bottom Line
Homeowners can use various options to finance solar purchases. While these options are readily available, homeowners should consult with solar energy experts, get multiple quotes, and read the fine print to make a prudent decision.