Installing solar panels to a property can be a great way for borrowers to save money on their energy bill. However, there are a few things to consider when researching and evaluating if financing solar panels is a sound decision by asking the following questions:
Will Solar Panels affect my mortgage?
The cost of solar panels can potentially impact a borrower’s ability to refinance or purchase a home. The only exception is if the borrower owns the solar panels outright, in which case it will have no implications on their ability to refinance their mortgage. If the borrower chooses to finance the cost of solar panels, the solar vendor can secure their loan in the form of a lien against the property which can be reconveyed and ultimately removed once the solar loan is paid off in full.
A lien is a form of security interest granted over a property to secure the payment of a debt or some obligation. In the case of solar panels, the lien is placed against an individual’s property. This lien will remain until the solar panel loan is paid off, at which point it will be reconveyed and removed.
A solar lien can create a problem for the borrower if they want to refinance or sell their property in the future. Solar panel manufacturers have the ability to temporarily lift or subordinate a solar lien, but not all solar finance lenders are required to comply with this agreement and most borrowers do not realize this.
Are Solar Panels right for me?
Although installing solar panels can be expensive, the good news is that it will likely boost the overall value of the home. This means that the solar panels will likely pay for themselves if the borrower decides to put their home up for sale. Recently, California passed a new law requiring all newly constructed homes to use solar energy by the end of 2020. This will benefit the environment, and in most cases save the borrower money.
What should I be aware of when searching for Solar Panels?
The first question that a consumer should ask when starting their shopping process for solar is if the solar vendor allows for loan subordination.
PACE and HERO programs are NOT recommended by mortgage lenders as they do not allow for any subordination, prohibiting the borrower from being able to ever refinance their mortgage. This is extremely inconvenient when interest rates drop and a borrower wants to refinance their property, but are prohibited by their solar vendor.
A key question to ask when exploring solar panel financing is if the vendor offers a subordination agreement so that the borrower can refinance their mortgage in the future. If they do not offer a subordination agreement, we would advise against working with that solar vendor, as they will never have the ability to refinance until the solar loan is paid off or their lien is reconveyed.
If you are interested in purchasing or refinancing a home with solar panels and still have questions or doubts give us a call at (760) 930-0569 and one of our mortgage loan experts will be happy to assist you.
