Home Equity

Using Home Equity Loans For Solar Financing

Solar installation companies can either point you to an independent home equity loan provider or they may have their own partnership with a provider that they prefer to work with. Many homeowners choose to find their own provider or use their existing line of credit to purchase a solar system.

So what’s new in using home equity financing for solar?

Some home equity loan products are beginning to take into account the value the solar energy system adds to your home into their cumulative loan to value ratio calculations.  This means more people would qualify for a loan with these products.

Maybe you’re thinking “How much value DOES a solar system add to my home?” Well, there’s not a ton of turnover yet in homes with solar so the data is not very clear.  The best summary is from an appraisal journal article written some time ago that states that any energy improvement made to your home adds twenty times the yearly energy savings in value.  So if you were to install double pane windows that save you $300 a year in utility expenses, that adds $6000 in value to your home.

So if a solar system saves you $1,000 a year in energy, it adds $20,000 to the value of your home. Few home improvements both add value to your home AND produce a valuable commodity year after year.