Solar energy has become the most common form of renewable energy in California. However, the upfront cost of installing a solar system may be too expensive for some people. Therefore, they look into solar financing plans instead.
One of the most common ways homeowners pay for solar panels is through a special program called the Property Assessed Clean Energy (PACE) Financing Program. Two of California's most successful PACE programs were started by Ygrene Energy Funds and Renovate America’s HERO loan Programs.
What Do You Mean by PACE Loan Programs?
PACE Financing is a form of financing available to homeowners who install solar panels on their properties. You can also use PACE loans for any home improvement project, including energy efficiency improvements.
Three states offer residential PACE financing: California, Florida, and Missouri. With PACE loans, consumers can use them for financing up to 100 percent of their solar system costs.
Because it’s different from a traditional loan, there aren't any regular monthly loan payment requirements with the PACE financing plan. Instead, PACE Financing is paid off using annual property tax bills.
It means you'll have an additional annual charge on your real estate taxes that will be used to pay back your PACE loan.
Loan payments take place during the loan. They're also called PACE property assessments. There are various term lengths for the PACE loan program. Some programs last up to 5 years, others up to 30 years. If you have a 15-years financing term, you will be paying PACE assessment for 15 years.
What Makes PACE Financing Different From Traditional Financing?
Your approval for PACE loans is independent of your credit history, and your payment obligations won't impact your credit report.
As a result, PACE financing has become one of the most popular options for people with low credit ratings. These individuals are far more likely to qualify for the program than traditional bank loan programs.
PACE loans differ from traditional loans because they're attached to the property rather than to you. If you use a PACE program to finance a solar energy installation, you won't be required to pay off any remaining balance after moving out of your house.
The next owner of the house will continue paying off the mortgage through increased real estate taxes.
You need to be aware that if you use PACE (Property Assessed Clean Energy) loans, they will place a lien on your house. If you fail to meet loan repayments, you could lose your property. This may cause it to be hard to sell the house later on.
We'll now look at California's two most common energy loan programs: Renovates Americas HERO program and Ygrene Energy Fund.
Renovate America is one of the largest funding companies for installing renewable energy systems. They offer PACE loans through their Home Energy Renovation Opportunity (HERO) program.
What Do I Need to Qualify For The HERO Program?
You must live in one of Renovates America's service areas to qualify for the HERO Program. You must own at least 10 percent of your home to qualify for a HERO loan.
To qualify for a loan, you must make timely mortgage and property taxes payments. You need to be able to repay the loans on time.
Your solar system must meet certain standards to be eligible for the HERO program. To qualify for financing through the HERO program, solar panels and solar inverter systems must meet certain requirements by the California Energy Commission (CEC).
One of Renovation America's certified solar installers must install your solar panel.
What are the Terms and Interest for the Hero Program?
You'll receive financing from the HERO program that covers 100 percent of the costs associated with installing your solar system.
They don't list any minimum or maximum interest rates on their site, but they provide sample funding contracts showing an interest rate range from 6.49% to 8.99% for California residents.
You may not get this range of interest rates from the HERO program, but it gives you some idea of what to expect when applying.
The HERO program lets its borrowers repay their loans over five, ten, fifteen, twenty, or twenty-five years. As your loan term lengthens, so too will your interest rate.
The sample financing agreements also outline four additional fees you may be required to pay when getting PACE financing from the HERO program:
It'll cost you a lot of money.
If you were to purchase a solar panel system that costs $15,000, you'd be required to pay an initial fee of approximately $1,000 to the HERO Program.
It doesn't count your loan, interest payments, or recording fees that the local government might charge for assessing your land.
Ygrene Energy Fund
Ygrene Energy Funds is a firm specializing in residential and commercial clean-energy finance. It offers services through the Property Assessed Clean Energy (PACE) system.
Ygrene's PACE funding comes from private partners. Since its inception in 2010, Ygrenee has financed over 64,000 projects.
Which Criteria Must be Met To Be Eligible for The Ygrenee Energy Fund?
Getting qualified for a Ygrene Loan is easy. You must live within Ygrene's service area and own at least ten percent of your property. Ygrene will determine whether you can repay the loan if you're eligible for a loan.
Your payback ability depends on your current income, mortgage payment history (how long you've been paying off your house), monthly debts, and other financial variables. Ygrene does NOT require a specific income level required for eligibility.
You need to get a Ygrene-certified solar panel installation to receive the benefits of the PACE program.
What are Ygrene Energy Fund’s Terms For Loans and Interest Rates?
Ygrene provides financing for up to 30 years, which depends on your financial situation. You can cover up to 100 percent of the solar system's total purchase price through the loan, and your loan payments will appear as a separate item on your annual property tax statement.
Ygrene offers different interest rate options depending on the customer; however, they do not disclose their minimum and maximum loan amounts for PACE financing.
However, most PACE finance programs will have an interest rate between 8% and 9%. According to some sources, Ygrene charges its customers an extra fee at the beginning of their finance agreement. However, Ygrene doesn't mention any fees on its site.
HERO vs.Ygrene: Which PACE Loan Suits Your Needs Best?
You won't be able to benefit from their financing programs if your property isn't located within one of their coverage areas.
To see if you're in either HERO's or Ygrene's coverage area, enter your address into their respective sites' location lookup tools.
While Ygrene focuses primarily on PACE Financed Energy Savings Projects, they don't provide nearly as much detailed info on their programs as the HERO program.
This lack of transparency by Ygrene could be worrying because it would allow them to add hidden charges and additional requirements to your financing deal.
They charge various fees for their services, but the HERO program offers helpful samples of financing agreements, so you know what you're signing.
Those sample documents lay out what sort of terms you might be offered for the loan, what interest rate you may be able to get, and what conditions you must fulfill during repayment.
This would help homeowners determine whether using HERO financing is right for their situation.
Both programs are quite similar overall. The interest rate varies on a per-project basis, there is no required credit score, and they will both provide financing for 100% of the project costs with flexible terms.
Financing a solar energy installation through PACE loans may help ease the financial burden of buying a new solar energy installation, but your long-run savings will be much greater if you pay for the installation in full upfront.
Using our solar calculator, you can calculate how much you can save by financing a solar energy system rather than buying one outright.
This estimate can help you decide whether a PACE is the best financing option for you.