Understanding solar module financing options

Solar financing options have made it possible for more homeowners to reap the benefits of having solar modules installed. By eliminating the high price tag for equipment and installation, solar financing is becoming a popular option for installing solar modules. There are a few different types of solar financing options available, so we’ve gone through the basics below to help you better understand them.

Power Purchase Agreements

A Power Purchase Agreement, commonly referred to as a PPA, allows the homeowner to negotiate the purchase price for the power only. This is done through a third party financing company who owns and installs the solar module. The benefit of a Power Purchase Agreement is the ability to purchase energy at a much lower rate than a consumer could get from a utility company. Most Power Purchase Agreements have credit score qualifications which must be met.

Pros:

• In most scenarios, no money is needed upfront.
• Savings on energy prices for the term of the contract.

Cons:

• No ownership over solar module, so homeowner will not receive tax credits.
• Transfer of contract may not be permitted if homeowner is selling home.

Solar Leases

In a lease, the solar module is also owned by a third party. This option is just like what you would find if you wanted to lease a car. You’ll stick to a payment schedule which is determined by the cost of the system. Your agreement may also include a buyout option before the end of the contract term, so you may choose to own your solar module system in the end.

Pros:

• Usually no money down.
• Savings on energy prices.
• Potential for ownership of system.

Cons:

• Contract is only transferable to a new homeowner if they qualify credit-wise.
• You won’t receive tax credits.

Solar Loans

A solar loan is just what it sounds like. A homeowner can borrow money to pay for the installation and equipment. You’ll stick to a repayment schedule and have to qualify based on your credit score and other considerations.

Pros:

• You’ll own the system.
• You’ll receive tax credits.

Cons:

• You may be required to make a down payment.

Property Assessed Clean Energy

Property Assessed Clean Energy (PACE) is a program ran by the government to help homeowners purchase solar modules. There are no credit score qualifiers and no money down is needed, but you must have 10 percent property equity. You’ll be billed when you receive your property tax invoice bi-annually.

Pros:

• No money down is available.
• Tax-deductible interest.
• You can receive tax credits.
• Financing usually will transfer to new owner upon sale of the home.

Cons:

• Your property tax bill will be higher.