There are many options for homeowners to finance solar energy. There are three main options: home equity loans, power purchase agreements, leases, and power purchase arrangements. Tax incentives can also be available. These options allow you to save money while still making a substantial contribution to the environment. Read on to learn more about the various financing options. Then choose the right one for you!
Home equity loan
Because you can use your home's equity to finance the installation of solar panels, home equity loans are a great option for financing solar energy investment. This type of loan is also known as a home equity line of credit and offers lower interest rates than most other solar loans. A home equity loan may also offer tax incentives that could offset the cost for solar panels.
These loans usually have a term of 7 to 20 years and interest rates that range between 5 to 7 percent. Homeowners often get a deduction for interest. Additionally, home equity loans are often paid off in one monthly payment.
Lease or power purchase agreement
A power purchase or lease agreement is a great method to finance the cost of solar installations. It offers homeowners and business many benefits. The lease allows for system maintenance and predictable long-term electricity cost. Additionally, you will pay lower rates for a lease than you would to the utility. It can be beneficial for both the parties depending on the terms.
Depending on the amount of solar energy you need to produce each month, a solar lease can offer an excellent way to finance solar. A solar lease requires a monthly payment to your utility or the solar leasing company. The monthly payment is usually less than the utility's rate and the lease company takes care of upkeep. If you do not need the solar system, the lease company has the right to take it out at the end.
Cash financing
Installing solar panels for your home can be done with cash financing using solar specific loans. These loans are available with low monthly payments, and either a zero or low rate of interest. They also offer a same-as-cash option that finances the portion of the tax credits the homeowner will receive. These loans have terms between 12-20 years and require no downpayment.
You may choose to apply for a personal loans depending on your circumstances and needs. Depending on your current financial situation, a personal loan may be a better option than a solar loan. Unlike a solar loan, a personal loan does not require collateral. In addition, personal loans typically have a shorter payback period than a solar loan. However, your monthly payments might be higher.
Tax incentives
Tax incentives are one way to finance solar-energy systems. These incentives are calculated based on your total investment in solar energy systems and can be as high as 26% of your total investments. There are many tax incentives to solar projects. A tax advisor can help you determine if you are eligible for one.
Some states will also give you additional credits for energy storage devices. If you buy solar power systems that include energy storage, you can use these credits to finance the installation. You can also transfer any credit that is not used into the following year. In this way, you will be able to deduct up $2,500 more tax the following year.