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• Secured loans: these require an asset that will serve as collateral for the loan – in most cases, that
asset is your home, similar to a home equity loan.
• Unsecured loans: these do not require any collateral other than the solar panel system.
Typically, a secured loan is preferred because it is tax deductible and has lower interest rates.
Many Solar Providers work with lenders that offer solar loans, but you should check with banks and credit
unions as well. Compare offers to make sure you are being offered a reasonable interest rate.
If you purchase and begin construction on a solar system before December 31, 2021, you can deduct between
22% and 30% of the cost of installing solar from with a federal solar tax credit (ITC). If you have questions
about the ITC or whether a loan is tax deductible, speak to a Certified Public Accountant (CPA) for tax advice.
Since you will be responsible for any maintenance and repairs, make sure you save the equipment warranties,
particularly for the inverter, which may need to be replaced sooner than other equipment. If you sell your
home, look for real estate agents and appraisers with experience selling homes with solar. You may include
the system in the house sale just like any other major home component.
PACE (Property Assessed Clean Energy)
PACE is a financing option that is available in some areas of California. In a PACE financing arrangement, a
PACE Program Administrator finances the upfront costs of a solar system, which you then pay through an
assessment on your property tax bill. With PACE financing, you own the solar system.
PACE financing lasts for a fixed term, typically around 10-20 years, and it is attached to your house. If you sell
your house before you have fully paid the PACE assessment, a buyer may require you to repay the assessment,
which could be thousands of dollars. Some mortgage lenders will not loan money to buyers to purchase
properties with PACE liens unless the full assessment is paid.
Unlike Leases and Power Purchase Agreements that require monthly payments, PACE assessments are
typically due once or twice a year with your property taxes. Given this unique arrangement, it’s important to
understand how much you will owe and when, so that you can set aside enough money throughout the year
to cover the amount.
If your house is mortgaged and you typically pay your taxes with an escrow or impound account, your
mortgage company may increase the amount you must pay monthly to cover the anticipated increase to your
property tax bill. Discuss how PACE will affect your monthly mortgage payment before you sign an agreement.
Questions to Ask a Lender About the Purchase of a Solar System with a Loan:
What is the total cost of the loan over the entire course of the contract?
How much will I pay up front, how much over time, and for how long?
What is my interest rate?
Who do I contact if I have questions about my loan payments?
How does a solar loan affect the ability to sell or refinance my home?