Ways to Finance Solar Panels
The loan route allows the homeowner to retain ownership of the system, but use a new or existing mortgage, line of credit, or other loan for the outstanding balance after incentives are accounted for. In most of California, if your electric bill is around $125 or higher, you can finance solar with no out of pocket or additional annual energy costs.
PACE enables individuals and businesses to defer the upfront costs that are the most common barrier to solar installation. The PACE loans are paid with property taxes over a course of roughly 20 years while energy costs are simultaneously lower, providing the PACE consumer with net gains. Also, because the solar panels and the PACE loan is attached to the property, the consumer can sell the property leaving the debt to be paid through the property tax assessed on the subsequent owners.
As always, cash is king. You will hands-down see the best payback period, Internal Rate of Return (IRR) and Return on Investment (ROI) on your solar project, when you purchase the system with cash. You receive all the same benefits of ownership as you do when you finance your solar power system, but without any interest rates, charges, or financing fees. If you have money sitting mutual funds, or other investments, you will want to evaluate the IRR you are receiving on those other investments - in most cases, solar is the better investment.
If cash is available, we recommend you look at going solar as an investment much like any other part of your portfolio including real estate, stocks, bonds, etc. With 15% to above 20% returns, an investment in solar is a great balance against your other investments whose performance is heavily tied to the overall economy. Solar will provide excellent returns regardless of an economic recession or boon. Having said that, the following factors will influence which financing options makes the most sense for you.