Can I Refinance My House With Solar Panels?
September 25, 2023
Are you wondering, “Can I refinance my house with solar panels?” The short answer is yes, you can.
A lender will most likely consider your solar system an upgrade to your home, depending on your system’s size and age. As a result, your home value increases, and you’re probably eligible for better refinancing terms.
You can then refinance your home loans and take advantage of that higher home equity!
Note: Your home’s increased value is a result of rising real estate values and the long-term energy cost savings from solar systems.
[Related: A Beginner’s Guide to Solar Panels]
Solar Panels Typically Increase Home Valuation
Let’s get this out of the way: Long term cost savings from solar panels increase a home’s value. And we’ve got facts to prove it!
According to the National Renewable Energy Laboratory, home valuation increases by $20 for every $1 in energy bill savings. So if a homeowner saves $700 annually in electricity costs, their home valuation increases by $14,000 based on solar panels alone. Not bad, right?
A 2021 Zillow study finds 67% of homebuyers consider energy efficiency a “very to extremely important” factor when purchasing a home. One estimate suggests homebuyers will pay 4.1% more for a house with solar panels.
What’s more, a large-scale home solar study by the U.S. Department of Energy’s Lawrence Berkeley National Laboratory reports potential homebuyers will pay an additional $15,000 or more for a home with solar panels.
Other Factors That Affect Home Valuation
Installed solar panels don’t guarantee a higher home valuation because a few factors come into play:
For example, if you live in an area with high electricity rates (like Austin, Texas), solar power helps you achieve maximum cost savings. However, if you live in an area with low electricity costs, solar panels don’t influence home valuation as positively.
On that note, states with large (and growing) solar markets encourage homeowners to go solar via laws, rebates and incentives. According to the Solar Energy Industries Association (SEIA), these states most increase your property value with solar panels:
- North Carolina
- New Jersey
Note: Freedom Solar Power services Austin, Houston, San Antonio and the Dallas-Fort Worth Metroplex in Texas. We service Tampa and Orlando in Florida. In Colorado, we cover Denver and Colorado Springs. We also serve Charlotte and Raleigh-Durham, North Carolina, as well as Norfolk-Virginia Beach, Virginia.
[Related: What To Know Before Installing Solar Panels]
How Do Financing Options Affect Home Valuation and Refinancing?
Whether you purchased a solar system outright with cash or used a solar lease, each route affects valuation differently.
You must own the solar system to include it in a home sale.
For example, if you leased your solar system, your solar provider owns the panels. You need to do one of two things to complete the sale as a homeowner:
- Buy out the lease
- Transfer the lease to the new owner
Depending on the time left on the lease, a buyout could be very expensive. Furthermore, the new homebuyer must meet highly specific qualifications from the solar provider to transfer the lease.
Property taxes also affect valuation. Your solar system increases your home valuation, and that means you pay higher property taxes. However, 36 states have enacted laws that totally or partially exempt solar owners from paying additional property taxes!
Note: Homes with modern solar panel systems generally show higher valuations than homes with older systems. Solar systems typically last 25 to 35 years — so you absolutely must maintain your solar equipment (like routine cleaning) to ensure a higher home valuation.
How To Refinance With Solar Panels
As you’ve likely realized by now, a home refinance with solar panels is a little more complex than refinancing without solar panels. Here are a few of the differences, according to how you obtained your panels.
If you purchased solar panels with a solar loan, a mortgage lender treats the solar loan as a second mortgage. That “second mortgage” requires a subordination agreement that the solar provider has signed.
This means the solar provider agrees that the bank is first in line to get paid back if you default on your payments.
While solar loans are common, they can affect your home’s potential equity and the new loan’s terms. Many homeowners pay off a solar loan before refinancing, but not everyone can manage it.
So, when deciding to refinance with solar panels, you need to give your lender the most accurate information possible in terms of your solar system’s age, condition and size.
Then, work with your lender to find the best route.
Homeowners leasing solar panels will likely have an equipment lien that the solar provider has filed. The lien gives the solar provider the right to repossess the solar panels if you default on your lease payments.
Additionally, you must obtain a temporary lift of the lien from the solar provider to refinance with solar panels. This allows the refinancing transaction to close — unless you pay off the lease (or loan).
What Are the Next Steps?
If you’re looking to refinance with solar panels, the first step is to thoroughly understand how you purchased the solar panels. In other words, did you purchase them (whether with cash or a loan), or did you lease them?
If you leased the solar panels, the second step requires that you work with your solar provider to temporarily lift any liens on the equipment.
As we mentioned earlier, you can pay off a solar loan before refinancing. Doing so eliminates any liens and speeds the refinancing process.
Note: Most panel manufacturers provide information and resources for homeowners looking to refinance. Leased solar panels also affect the debt-to-income ratio, which lenders use to determine the size of a refinancing mortgage available to you.
Contact Freedom Solar Power To Go Solar Today
While refinancing with solar panels is a little involved and time-consuming, most lenders are familiar with the money side of things as well as the refinancing process.
Here’s the bottom line: You shouldn’t be afraid to refinance.
Although mortgage rates are high now, most experts predict interest rates will drop as inflation continues to cool — thus lowering mortgage rates. That’s a big win for you and a sign to go solar today.
If you want to add to your current solar system or buy a new one outright, contact Freedom Solar Power. We offer SunPower® solar panels — the most efficient panels on the market — and premier backup power solutions like the SunPower SunVault and Tesla Powerwall.
Give us a call at (800) 504-2337 or complete our inquiry form. One of our energy consultants will be in touch!
Featured image via Unsplash