Buying with Bank Financing

[russ]

That's a rather cynical viewpoint, but yes, it's a simple spreadsheet.

Any document is "copyrighted" by simply publishing it. Adding the words means nothing.

[EEMLoanGuy]

A copyrighted simple spread sheet - I guess it was a way to get your name on it.

That's a rather cynical viewpoint, but yes, it's a simple spreadsheet. What's not so simple is it takes into account various credit scores when displaying the available rate. Additionally, it takes into account "dealer fees" which consumers are not aware of. A typical consumer will understand "points" when talking about a loan, but many of these loans are represented as "no closing cost" loans. That's very far from the truth. Sometimes the installer is charged up to 20 points (20% of the loan amount) to offer the financing and this cost is passed onto the customer. By law the dealer can't pass these points on in a transparent way so they will offer a "cash price" or "cash discount".

It's important to understand that a 2.999% loan with "no closing costs" is in no way a loan free of costs, they are built into the sales price. This spreadsheet illustrates those costs and the rates available as of today. Granted, it's simple but there's nothing like it available on the web. I've seen some online calculators that compare cash purchases vs. lease vs. loan and don't even provide the terms of the loan, so please forgive my interest in receiving credit for aggregating information on the various loan programs and putting them side by side for a "simple" comparison.

All that said, it is simple and it was made for my use and then I started sharing it with solar sales people who had a good grasp on the loans available. If you have some constructive criticism on how it could be improved to make understanding these loan programs easier for home owners I'd very much welcome that feedback. Additionally, I used simple nested IF THEN statements for the formula's and I know that some visual basic would go a long way to making this calculator better, but it's been a long time since I worked with VB and I have not interest in relearning it. Anyone who is interested in making this calculator better I'd like to hear from and I'd make sure that their work is recognized with a copy-write or whatever else they'd like.

[russ]

In short, you should not take any output from this calculator to mean these terms are available to you or anyone else. The calculator is for EDUCATIONAL PURPOSES ONLY and intended to illustrate some of the best loan options side by side.

https://www.azenergyloans.com/files/...omparison.xlsx

A copyrighted simple spread sheet - I guess it was a way to get your name on it.

[EEMLoanGuy]

The short answer is, it depends.

There are currently four main factors to consider:

• Tax liability
• Savings from Solar PV
• Financing terms available
• Available ROI through other investments

There are numerous ways to finance solar PV:

1. A lease (third party ownership)
2. An unsecured loan
3. A secured loan (FHA Title I)
4. A Home Equity Line of Credit or Home Equity Loan
5. An Energy Efficient Mortgage

As a rule of thumb, a home mortgage is the best source of financing if as of 07/12/2014 your current interest rate on your primary mortgage is above 4.5%. The next cheapest source of funds is a home equity line/loan. However, these three options require certain amounts of equity in the home even if only 3.5% in the case of a home mortgage.

The next best option is a Title 1 home improvement loan. These loans do not have equity requirements, but require qualification like a typical mortgage and take a second or first lien position on the home. In some rare cases, such as the DCU loan, an unsecured loan has better terms than the FHA Title I loan. However, with that one current exception unsecured loans tend to have worse terms than Title I loans, additionally these loans start to have payments equal to or higher than fixed monthly leases.

The monthly lease should be approached with caution. It tends to carry the highest payment (other than some less than ideal terms offered on some unsecured loan products) and carries no benefits of ownership like increased appraised value, direct access to tax credits, freedom to sell your home without special consideration to the lease, etc.

All of that said, the end answer is still "it depends". You need to look at all options that are available and then determine which one works best for you. Solar is not just an energy commodity as some are framing it, it's a major improvement to your real estate (with the exception of TPO which in theory can decrease the value of your home) and as such you have to think about energy savings and long term plans just like you would in any real estate or major home improvement transaction.

Here is a link to a calculator that I used when consulting with homeowners that are considering various loan options. This calculator comes with a couple disclaimers:

• There are terms and conditions associated with the various loan programs that are not reflected in this spreadsheet.
• Rates and terms available could change at any time
• Credit and underwriting standards could change at any time
• Fees could change at any time

In short, you should not take any output from this calculator to mean these terms are available to you or anyone else. The calculator is for EDUCATIONAL PURPOSES ONLY and intended to illustrate some of the best loan options side by side.

https://www.azenergyloans.com/files/2014/07/solar-loan-comparison.xlsx

[J.P.M.]

Thanks for that. I will continue to be sorry. Sorry that I didn't remove a slash. The internet is full of inaccurate info and one site that I was referencing said kWh, while another accurately said MWh. I am sure that J.P.M. as well as others understood what I meant aside from the typo.

All this is off topic, but since you seem to be deciding how I think, I feel it's my responsibility to set the record straight. Actually, and not to undermine your surety of what I was thinking, my porky engineering mentality inspired first reaction was : "Still ain't right !" and started a response. Then I thought: If someone doesn't care enough to take the time to get it right, why should I care ? Consider the source as out of their element and move on. Besides, I make a lot more than my share of mistakes. I try to pick my battles and save efforts for matters that are important to me. Opinions about importance vary. I respectfully request you do not do my thinking for me. I'm moving on.

[BGuy838]

Please continue being sorry. There is a big difference between Megawatt-Hours (MWh) and Megawatts per hour (MW/h). The latter units can only be used in some very contrived situations.

Thanks for that. I will continue to be sorry. Sorry that I didn't remove a slash. The internet is full of inaccurate info and one site that I was referencing said kWh, while another accurately said MWh. I am sure that J.P.M. as well as others understood what I meant aside from the typo.

[inetdog]

EDIT: yes, that is MW/hr, sorry.

Please continue being sorry. There is a big difference between Megawatt-Hours (MWh) and Megawatts per hour (MW/h). The latter units can only be used in some very contrived situations.

[J.P.M.]

EDIT: yes, that is MW/hr, sorry.

A little more detail (and a huge perk of MA solar right now)- everything generated by a PV system not only can be used for ones' own energy bill and usage, but also accrues in the SREC system. For every 1MW/hr a PV system generates, one SREC is created for that owner. Each one is sold for $285. So if you have a system hearing 5MW/hr each year, in addition to reducing your bill, you can sell the SRECS back to the energy company for a total of $1,425.

Yea, SREC's are a deal. I'm not sure I agree with the concept, but I'd sure not turn it down. Most out here in the land of fruits & nuts are unaware they exist. AB 327 may change that, much to the consternation of lessors if/when CA SRECs come alive for residential.

[BGuy838]

Something appears amiss w/ # 2 above. Is that $300/megawatt-hr. ?

EDIT: yes, that is MW/hr, sorry.

A little more detail (and a huge perk of MA solar right now)- everything generated by a PV system not only can be used for ones' own energy bill and usage, but also accrues in the SREC system. For every 1MW/hr a PV system generates, one SREC is created for that owner. Each one is sold for $285. So if you have a system hearing 5MW/hr each year, in addition to reducing your bill, you can sell the SRECS back to the energy company for a total of $1,425.

[J.P.M.]

1. The 111% is actually on the lower end. Before I discovered this site, I made some assumptions and decisions which I have since learned to be not the best. But the 100%+ generation is still a plan for a couple reasons- it is just my wife and I now, so we expect to have more energy use in the future, and this is partly planning for that. Also, here in MA, we can build up a large negative usage balance to either sell to other customers in our energy providers' network, donate (potential tax benefit), or simply hold onto for the future.

2. Right now the floor on the SRECs is $285 ($300, less 5% fee) per 1kW. I have been told that this floor is pretty secure for the next couple of years, and payments are guaranteed for 10 years.

3. I know we have a fixed cost of $0.09 which represents a supplier charge, but am not sure if there are any other fixed fees. I'll have to verify that all of our bill can be net-metered so that the entire bill is eliminated-I would think this is normally the case?

4. Nothing big in the future, but it is my feeling that even if there was, this expense is simply replacing an existing one in the form of our monthly electric bill, so this shouldn't impact that. shouldn't, but of course that is never 100%.

We have a program that offers a 0% loan for seven years for other energy efficient upgrades (HE boiler, water heater, insulation, windows, etc.), but nothing for a PV system. I've heard it may be introduced later this year, but at the cost of no longer having the 12%-16% state rebate.

Something appears amiss w/ # 2 above. Is that $300/megawatt-hr. ?

[BGuy838]

Financing can work: it depends on the details and your own specific situation. Questions I would have:

1. Why 110% usage? Depending on your electric rate details and how net metering is implemented, that excess production may not be very valuable.
2. Is the pricing of the SREC fixed or could market forces slash it dramatically?
3. Are there fixed costs to your electric bill that don't get reduced below a certain point whatever your production?
4. Any thoughts of moving in the near future or major home remodels that make things shaky financially?

1. The 111% is actually on the lower end. Before I discovered this site, I made some assumptions and decisions which I have since learned to be not the best. But the 100%+ generation is still a plan for a couple reasons- it is just my wife and I now, so we expect to have more energy use in the future, and this is partly planning for that. Also, here in MA, we can build up a large negative usage balance to either sell to other customers in our energy providers' network, donate (potential tax benefit), or simply hold onto for the future.

2. Right now the floor on the SRECs is $285 ($300, less 5% fee) per 1kW. I have been told that this floor is pretty secure for the next couple of years, and payments are guaranteed for 10 years.

3. I know we have a fixed cost of $0.09 which represents a supplier charge, but am not sure if there are any other fixed fees. I'll have to verify that all of our bill can be net-metered so that the entire bill is eliminated-I would think this is normally the case?

4. Nothing big in the future, but it is my feeling that even if there was, this expense is simply replacing an existing one in the form of our monthly electric bill, so this shouldn't impact that. shouldn't, but of course that is never 100%.

We have a program that offers a 0% loan for seven years for other energy efficient upgrades (HE boiler, water heater, insulation, windows, etc.), but nothing for a PV system. I've heard it may be introduced later this year, but at the cost of no longer having the 12%-16% state rebate.

[Ian S]

Sunking- Question regarding this. I am looking at buying a PV system, and will be doing so with a 15 year Home Equity loan with no closing costs or fees. My rationale is this: We are paying on average $60/mo for electricity. A 15yr HE (tax deductible) loan at 3.99% for a PV covering 111% of annual usage would be $56.97. We could then also sell our SRECs each year for ~$1,000, which would last for 10 years. From my (very simplified) point of view, there would be a positive cash flow each year of ~$700 (paying not more than $300 in loan interest each year), and then after 10 years our electricity would be covered by the loan, making this decision positive.

What are your thoughts? Are their holes in my logic that I'm missing?

Financing can work: it depends on the details and your own specific situation. Questions I would have:

1. Why 110% usage? Depending on your electric rate details and how net metering is implemented, that excess production may not be very valuable.
2. Is the pricing of the SREC fixed or could market forces slash it dramatically?
3. Are there fixed costs to your electric bill that don't get reduced below a certain point whatever your production?
4. Any thoughts of moving in the near future or major home remodels that make things shaky financially?

[BGuy838]

Well stated JPM. If you cannot afford to pay in cash, forget it. Even if you can afford to pay in cash, you are better off investing that money elsewhere. Take a loan and no wonder you are poor.

Sunking- Question regarding this. I am looking at buying a PV system, and will be doing so with a 15 year Home Equity loan with no closing costs or fees. My rationale is this: We are paying on average $60/mo for electricity. A 15yr HE (tax deductible) loan at 3.99% for a PV covering 111% of annual usage would be $56.97. We could then also sell our SRECs each year for ~$1,000, which would last for 10 years. From my (very simplified) point of view, there would be a positive cash flow each year of ~$700 (paying not more than $300 in loan interest each year), and then after 10 years our electricity would be covered by the loan, making this decision positive.

What are your thoughts? Are their holes in my logic that I'm missing?

[pleppik]

An Exception perhaps, if the story is true, John D. Rockefeller who, when asked by someone if he was wealthy enough, and if not what would make him happy is said to have replied: " No, just a little bit more".

True or not, it's believable.

In the other corner is John Bogle, the founder of the mutual fund company Vanguard, who wrote a book called "Enough" a few years ago. It's basically a meditation on the fact that he's got plenty of money (which he clearly does), and how a lot of people--especially the rich ones--would be happier if they spent less time worrying about getting more money.

[J.P.M.]

I've known poor people who became rich, rich people who became poor, and a few round-trippers.

All else being equal, everyone would rather have money than not. But things aren't always equal. I've had a few friends who stayed in lucrative jobs which they hated, and they definitely would have been happier with less money.

I also know people who have made a conscious decision to earn less than they could because they didn't want to give up time or autonomy. They also seemed happier with less money.

I think that for a lot of people, once you have enough money to live comfortably and worry-free, more money usually doesn't make you any happier.

An Exception perhaps, if the story is true, John D. Rockefeller who, when asked by someone if he was wealthy enough, and if not what would make him happy is said to have replied: " No, just a little bit more".