In 2023, rooftop solar is a more affordable and accessible option for homeowners than ever before. Thanks to technological advances and growing competition in the solar industry, rooftop solar systems’ costs have decreased significantly, making them a more viable option for homeowners across the country.
That being said, it’s still not cheap. The majority of people who are interested in this solution will likely have to track down some financing options. We thought we would make it a bit easier for you.
This guide will explore how homeowners can finance a rooftop solar system in 2023 and take advantage of the many benefits.
Why Go Solar?
There are many reasons to add solar panels to your home, such as reducing your carbon footprint, saving money on energy bills, and increasing the value of your home.
Solar panels work by converting sunlight into electricity. It can then power your home by supplementing your existing energy supply or providing all of your energy needs. They are a clean, renewable energy source and can help you reduce your carbon footprint.
In addition, solar panels can reduce your energy bills and save you money. However, they do this in the long term. Initially, the cost of installing solar panels may be high, but the eventual savings can be substantial.
Not only will they provide power for your home, but solar panels can potentially raise the market value of your property.
Because installing a rooftop solar energy system can be expensive and time-consuming, having one already set up could make buyers more willing to pay a higher price. Now you just need to make it happen. Here are some cost figures you should know:
The Cost of Rooftop Solar Panels
According to a Consumer Affairs report, the average cost for a residential system can range from $11,000 to around $15,000, although the exact cost will vary, based on property size and location. Regarding return on investment, rooftop solar panels typically pay for themselves within 5-10 years.
After that, they will continue generating free electricity for many years. Thanks to falling costs and rising efficiency, rooftop solar panels are a smart investment for any homeowner looking to go green and save money.
Types of Solar Panels
Monocrystalline, polycrystalline, and thin-film solar panels are the three main types of solar panels.
Monocrystalline panels are made from a single silicon crystal and are the most efficient panel type. However, they are also the most expensive.
Polycrystalline panels are made from multiple silicon crystals and are less efficient than monocrystalline panels. They are also less expensive.
Thin-film panels are made from a film of material such as cadmium telluride or amorphous silicon. They are the least efficient panel type but also the least expensive.
This video by Best Electric provides a nice breakdown of how a home solar power system works:
5 Ways to Finance Your Rooftop Solar Energy Project
Financing solar panels and a renewable energy system for your home is easier than ever. If one option doesn’t work out, move on to the next opportunity! Here are five different ways to consider for financing your solar panels:
1. Solar Leases and Power Purchase Agreements (PPAs)
A popular way of financing solar panels is to enter into a solar lease or power purchase agreement (PPA). With a solar lease or PPA, you essentially rent the solar panels from a solar company. The company owns, operates, and maintains the system, and you agree to pay a monthly fee for the electricity that the system produces.
Leases and PPAs can be a great option for people who don’t have the up-front cash to pay for a solar system outright or those who don’t want the hassle of maintaining the system themselves.
But there are some cons. First, you may be locked into a long-term contract (often 20 years or more), which can be difficult to get out of if you decide you no longer want the system or need to move.
Secondly, the monthly payments may increase over time, which could offset your savings on your energy bills.
2. Third-Party Financing
Another way of financing solar panels for your home is through a third-party lender, such as a bank, credit union, or specialty solar financing company.
Third-party financing is another way of saying that you go to a lender, get a loan, and then pay monthly payments on it. For example, you can take advance of SoFi refinance mortgage loans to help pay for your solar panels.
It’s a good choice if you want to own the panels outright and don’t mind maintaining the system. Plus you can take advantage of any federal, state, or local solar incentives that might be available.
The main downside of this is that you’ll have to make monthly repayments for the loan, which could be for 10 years or more. This could increase your overall costs if solar panel prices continue to drop during that time.
3. FHA 203(k) Loans
What if you buy a house and it already has solar panels installed? You may be able to finance the purchase with an FHA 203(k) loan. It’s great for people who are buying a fixer-upper and need to finance both the purchase price of the home and the cost of renovations.
With an FHA 203(k) loan, you can roll the cost of the solar panels into your mortgage. The 203(k) can be a good option if you’re buying a home that has solar panels and you want to finance the purchase with a low-interest loan.
The main drawback of this option is that you’ll have to make monthly mortgage payments, which could be 15 years or more. You’ll also have to find a contractor that can start within 30 days of accepting the funds.
4. Home Equity Loans
If you have equity in the house, you may be able to use home equity loan to finance your solar installation. This type of borrowing allows you to leverage the equity you have in your house.
Home equity loans are similar to any other loan. They just use the equity in the property as a form of collateral. The big limitation or risk here is that your could be repossessed if you can’t make the monthly payments.
Home Equity Lines of Credit
Another option is to finance your solar panels using a home equity line of credit (HELOC). How this works is you go to whoever financed your house and ask for the line of credit. As an example, let’s say you have $50,000 in equity. They’ll say, ok, we’ll extend you $30,000 in credit.
With a HELOC, you can borrow funds as you need and only make payments on the amount you borrow. It’s important to note there will be interest charged on anything you decide to borrow. This can be a good option if you’re unsure how much money you’ll need to finance your solar panels.
5. Personal Loans
If you don’t want to take out a loan for your solar panels specifically, you could finance them with a personal loan. Provided you have good credit and qualify for a reasonable rate, it’s worth a consideration.
With a personal loan, you’ll have to make monthly repayments until the loan is paid off. They could be a good idea if you want to own your solar panels outright but don’t have the up-front cash to pay for them.
The biggest downside here is that you might pay more in interest over the loan period than you would with a loan specifically designed for financing solar panels.
Final Thoughts on Financing Solar Panels
Financing solar panels can be a bit of a challenge but there are many ways to make it happen. You can take out a loan for your solar panels specifically, finance them with a personal loan, or use a home equity loan or line of credit.
It’s important to consider all the possibilities and choose the one that’s best for you. Make sure to compare providers to find the best interest rate possible. And always read the terms and conditions carefully to know what you’re getting into.
By following these tips, you’ll be on your way to financing solar panels and switching to renewable energy, with the bonus of saving on your utility bill.
Frequently Asked Questions
Can I get a government grant to finance solar panels?
Yes, there are government grants available to help finance solar panel installation. However, they are mostly reserved for universities, government facilities, and laboratories. Read the full guide to learn more about government incentives for solar.
What's the best way to finance solar panels?
The best way to finance solar panels depends on your individual circumstances. When choosing a loan, you'll need to consider the interest rate, terms and conditions, and repayment schedule. Read the full guide to learn more about solar loans and how to choose the best way to finance your rooftop solar.
Do I need good credit to finance solar panels?
No, you don't need good credit to finance solar panels. However, you do need to be eligible for a loan and you may get a better interest rate with good credit. Read the full guide to learn more about the best solar loans to choose.
References and Useful Resources
US Government: Top 6 Things You Didn’t Know About Solar Energy
Bankrate: How to Get a Mortgage in 10 Steps
Environment: The Importance of Solar Energy in Our Daily Life