Let’s talk about Solar Panel Financing and how it works. When buying a solar system for you property most people turn to financing, but which financing options will you or your property will qualify for will make a difference.
Don’t be fooled, almost every solar panel contractor works with the same few solar finance companies, generally the PACE program.
One of the requirements for PACE is that you have about 10% equity in your property (if you don’t there are other programs). An advantageous features of these loans is that they are equity based, and don’t go on your credit, thereby not increasing the debt on your credit and throwing off your debt-to-income ratio next time you go buy a car or apply for additional credit.
Solar Panel interest rates
Would you rather have a 3.9% interest on your solar unit, or a 7.9% interest? Most people would want the 3.9% interest, right? what if I told you that you would have to pay 15-20% more for your solar system if you took the 3.9% interest from a solar contractor vs the 7.9% interest? Would you still be interested in the lower financing rate?
What is the interest rates on your house, on your credit cards?
There is always a catch, and that catch is called “Buy Down”.
You might remember when you were buying or even refinancing your property, the bank asking you about buying down the points or interest rate. At that time they might have been offering you to lower the rate by about .15 or .25 of a percent for 1% or 2% of the loan value. Do you remember that?
This is how it works, in order for you to get a lower interest rate on your solar panel financing you or the solar contractor has to buy down your interest rate. This means the contractor has to pay the bank a certain percentage of the gross value of your financed amount in order to buy down the rate.
Of course no one cares that the contractor has to pay… But you should!
Solar contractors just like anyone else are performing a job for a fee, no one works for free – do you? No.
What about 3.9% interest on Solar Panels?
How do some solar contractors get you a 3.9 percent interest rate? They charge more for the solar panels system. They increase the price on the unit you are buying by up-to 20% in order to buy down the interest rate on your financing in order to get you that 3.9% interest.
You can get lower interest loans from your bank or going to a lender directly. A home equity loan might be something to consider.
So here is the question – Which solar panel financing is best for you? Would you rather pay more for the product you are buying or get a better interest rate?