• Many homeowners who consider going solar are deterred by the perceived costs involved with getting panels installed. While some homeowners who go solar have the cash upfront to pay for a system, many do not, and the truth is that there are many financing options out there that allow homeowners to go solar for no money down, and have a very low monthly payment.

    “I can’t afford solar” is no longer an excuse, as there are solar financing options out there that can work for any homeowner on any budget, so homeowners should familiarize themselves with these options to find out what works for them.

    When it comes to solar financing, there are two main types homeowners should be aware of.  The most popular type of financing is a solar loan, where the system is financed by a third party, and the homeowner makes monthly payments to the third party that is put towards owning their solar system. There are also solar panel leases, where the solar system is owned by the solar company, but they install the panels on the home and charge the homeowner a monthly fee for the power the system produces.

    In both cases, the solar will fully or mostly eliminate the homeowner's electric bill, and the monthly payment will be less than the prior electric bill, so the homeowner starts saving immediately. Each of the solar power financing options has its positives and negatives, and is appropriate for different situations, so knowing what each option entails is critical when making the decision to go solar.

    Solar Loans

    Solar panel loans allow homeowners who do not have the cash to pay for a system up front to get their system financed through a third party so that they can make monthly payments towards owning their system. Solar loans provide the greatest long-term value of any of the solar panel financing options, as after the homeowner is done paying off the system, they will no longer be paying power bills or a monthly solar payment and will be doing nothing but saving.

    A solar loan also presents short-term savings, as the monthly payment is typically less than the power bill was before solar was installed, and after the solar is installed the power bill is eliminated through the solar production. The beautiful thing about this is that once the solar is installed, the money that was being wasted on buying electricity from the utility is now being invested in the solar system instead. So instead of throwing that money out the window, the money is being reinvested into the home and is paying for an improvement that will save the homeowner thousands of dollars a year for the lifespan of their system.

    Who are solar loans right for?

    Solar loans are for homeowners who are looking to reap the long-term benefits out of their solar system. Since the significant savings from installing solar begin after the system is paid off, homeowners who choose a loan to pay for their solar typically plan to stay in their home a long time to maximize the financial benefits. Also, due to the significant tax credits that are presented by owning solar, typically homeowners who choose a solar loan have some form of federal tax liability.

    What Institutions Provide Solar Loans?

    As solar has grown in popularity in recent years, many different types of lending institutions have started to provide solar loans. Some of those institutions include, but are not limited to solar panel manufacturers, credit unions, and banks.

    The Benefits of a Solar Loan

    There are many benefits to solar loans, including but not limited to:

    •  The Federal Solar Tax Credit - Using a solar loan to pay for solar means that the homeowner can utilize the Federal Solar Tax Credit. The Solar ITC is a tax credit that is granted to homeowners who own their solar, which allows the homeowner to deduct 30% of the cost of their solar installation from their federal tax liability.  As the average solar installation typically costs upwards of $25,000, the amount of credit the homeowner can receive can be significant, and make the solar deal that much sweeter. If the homeowner doesn’t have enough tax liability in the year that they install solar, the credit can be rolled over to the next year.
    • Start Saving Immediately - Homeowners who use a solar loan to pay for their solar typically pay nothing upfront for the system, and then pay a monthly payment to the lending institution. The solar installer will typically install enough panels such that the amount of power produced over the course of the day and the credits produced from the unused solar power will offset the power bought from the utility at night when the panels aren’t producing. This means at the end of the month, the homeowner will have little to no power bill, and will just have to pay the monthly solar payment. This payment is lower than the homeowner's power bill was before installing solar, so even in the first month, the homeowners are already saving money by not having to pay their power bill. What’s even better is that the money that the homeowner was spending on power is now being reinvested into their solar system.
    • Savings Increase Over Time - Homeowners who are offsetting their power bill with solar no longer have to worry about electric rate hikes, which means that their savings will increase as power becomes more expensive. Utility rates typically increase 2%-3% a year, but specifically in San Diego, where SDGE recently proposed an 11% rate hike, the potential for savings as rates increase is huge. While homeowners who haven’t gone solar will be bemoaning the rate hikes, the solar homeowner will be smiling as their savings compound.
    • Added Home Value - Recent studies have shown that an owned solar system can add significant value to a home, an average of $20,000. An owned solar system can be an attractive home addition to a potential home buyer, so for homeowners who plan on selling their home at some point, solar can make the home more marketable and standout amongst the crowd. A solar lease can often complicate a home selling process, so for those homeowners who plan on selling at some point, a solar loan is the way to go.  

    Utilizing Home Equity for Solar Loans  

    Typically, solar loans require some form of collateral, the most common being home equity.  The types of home equity-based solar loans include:

    Home Equity Loans - With a home equity solar loan, homeowners borrow against the equity they have in their home to pay for the solar. Typically, these types of loans have terms of around 7-20 years and have interest rates of around 5%-7.5%. Homeowners who go with a home equity loan may be able to write off the interest on the loan, they just need to speak to their financial advisor to find out for sure.  

    Home Equity Line of Credit - If a homeowner chooses to pay for their solar with a home equity line of credit, they will obtain a line of credit through the bank in the form of a credit card or checkbook as opposed to the lender providing the entire lump sum of the loan up front. The homeowner has the ability to draw from the line of credit as much as they need over a period of time agreed upon with the bank, similar to other lines of credit. With a home equity line of credit, the homeowner is loaned money against their home equity, but in this case, as the homeowner pays back the loan, the amount of available credit is replenished. The draw period is typically 10-15 years, in which the homeowner can borrow as much as they want.  

    Property Assessed Clean Energy Loans (PACE) - Another solar loan option is a Property Assessed Clean Energy Loan (PACE). How a PACE loan works are the homeowner pays back the loan through assessments added to their property tax bill. The capital for the loans come from local governments selling bonds to investors for providing the capital for energy retrofits on commercial and residential properties.  

    Our Mosaic Solar Loan

    Mosaic is one of the nations top solar loan companies, offering great loans with some of the best terms out there. We at SunPower by Stellar Solar are very excited to now be offering this loan. Currently, there are three different options for Mosaic loan terms: a 10-year loan with 3.99% interest, a 15-year at 4.99%, and a 20-year loan at 5.49%.

    With the Mosaic Solar loan, there are very little to no loan fees and no prepayment penalties.   These rates are applicable as of 8/1/2018 and are based on approved credit.


  • Solar Leases

    Solar leases are very different from solar loans, as with a lease, the homeowner does not own the solar system. Typically the solar installer charges the homeowner a stable monthly payment for the power the solar electricity produces, and not for the installation or the panels themselves. This means that the solar company owns the panels and will be charging the homeowner for the energy the solar creates, like a power company on your roof. The monthly payment that the solar company charges the homeowner will be less than their power bill, so they will still be saving every month. Leases are typically for a period of 20-25 years, at the end of which the solar installer will either take the panels back or sell them to the homeowner at market price.

    Who are Solar Leases for?

    Solar panel lease programs are typically for homeowners that are looking for short-term savings on their power bill, as at the end of their lease term, they will not own their solar.  Homeowners who are retired or who do not have the home equity to apply for a solar loan can still greatly benefit from the short term savings leases provide.

    The Benefits of a Solar Lease

    • Start Saving Immediately-  Much like solar loans, solar leases allow homeowners to go solar for zero down, and start zeroing out their electric bills immediately. Once installed, they make a monthly payment to the solar company that is less than the electric bill, so they will save after the first month of being installed.
    • Immunity to Electric Rate Hikes - Also like the solar loan, a solar lease makes it so that homeowners will greatly reduce or completely eliminate their power bills, which makes it so that they are no longer susceptible to the increasing electric rates that are inevitable in the coming years. The lease payment will remain the same unless there is an escalator, so the savings will increase and will be predictable into the future.
    • Production is Guaranteed - With a solar lease, the solar company typically guarantees production, so if the solar is not producing, or temporarily goes down, the solar company has to reimburse the homeowner for any lost production.
    • No Collateral Involved - Unlike a solar loan, solar leases do not require any collateral, so homeowners with no home equity can still go solar. If a homeowner does have equity, the lease allows the homeowner to use it for other home improvement projects.

    There are a few downsides to the solar lease that make the ROI less than that of a solar loan. For example, because the homeowner does not own the system, they are not eligible for the Federal Solar Tax Credit, or any other tax incentives like the federal tax credit. Also, because the homeowner has been paying for the power, and not the panels, they are not investing in their home, like they would with a solar loan.

    Power Purchase Agreements

    Much like a lease, with a Power Purchase Agreement, the homeowner does not own the panels and is buying the power their panels create from the solar company. The difference between the two is that with a lease, the homeowner pays a fixed monthly payment to the solar company, while with a PPA, the homeowner agrees to pay a certain amount per watt of power produced, so their bill can differ every month based on how much power they use.  

    One thing homeowners should note before deciding on a lease or PPA is that with both, a potential 1%-3% escalator can potentially be added to the price which can make the payments higher each year. Homeowners should be knowledgeable of the details of their lease or PPA before they decide on any solar energy financing.

    So when looking at solar energy financing, homeowners are presented with many options that can often be confusing. What they should know going into the consideration process is ultimately what they want out of their system: long-term value with a high ROI, or short-term savings on their power bill. Ultimately, that intent, along with their credit and equity situation will determine the path they choose. So property owners in San Diego who are looking into a solar project and can’t figure out the financing that fits them should contact us today to find out more.


  • About the Author

    Michael Powers


    Michael is one of the founding partners of Stellar Solar. In 2001, he helped launch The Home Depot’s national solar energy program which is now offering home solar through hundreds of stores in nearly a dozen states. He is a writer and marketing professional with over 30 years’ experience in the fields of energy, market intelligence and leadership training. He currently serves as treasurer and board member of Global Energy Network Institute (GENI), a San Diego-based non-governmental organization that advocates linking renewable energy resources around the world using electricity transmission.