Buying with Bank Financing

[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]

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.]

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.

[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.

[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.

[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.

[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

[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]

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]

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]

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

Ok, I did not know that. My experience is in finance and solar, not publishing. However, with that in mind I'll probably modify future documents to exclude the "copywrite". I just don't see where it really matters in the grand scheme of things.

I assembled the rate and term sheets from various lenders to be able to code the spreadsheet. These rate and term sheets are not generally available to the public so I see value in this spreadsheet. In my experience solar sales people are largely ignorant of the best financing terms available for solar (FHA Title I, Powersaver Grant Programs, 203K loans, EEM's and various long term unsecured loans) and as such homeowners considering adding solar to their home are also largely unaware of these programs. Most homeowners still think they need to take out a home equity line or take an unsecured loan with horrible terms and solar installers are not doing the best job of changing that perception.

To have solar placed on your roof it needs to be your roof. The vast majority of people considering adding solar to their homes would not even own their home if the only mortgages available were 10 year loans with 10%+ rates. Affordable home financing made the dream of homeownership a reality for most homeowners today. It's the same with solar and as more of these loan programs become available and people are made aware of them more people will adopt solar...and that's a great thing. So please pardon me for thinking the discussion of copywrite is a bit silly. If your purpose is to gauge my intent there are better ways to do it.

[silversaver]

5 to 7% rates...... no thanks

Yes, I agree most of installers charge 10 to 15% loan fee for the 2.99% is just a joke. Just like CC companies offers 0% for 12 months but charges you 3 to 4% transaction fee.

[russ]

5 to 7% rates...... no thanks

Yes, I agree most of installers charge 10 to 15% loan fee for the 2.99% is just a joke. Just like CC companies offers 0% for 12 months but charges you 3 to 4% transaction fee.

Oh but people love the "free" stuff - always a special deal just for them.

[silversaver]

Oh but people love the "free" stuff - always a special deal just for them.

people enjoy spending future money now, worry about it later and make it sounds like a good financial planning.....

[J.P.M.]

Ok, I did not know that. My experience is in finance and solar, not publishing. However, with that in mind I'll probably modify future documents to exclude the "copywrite". I just don't see where it really matters in the grand scheme of things.

I assembled the rate and term sheets from various lenders to be able to code the spreadsheet. These rate and term sheets are not generally available to the public so I see value in this spreadsheet. In my experience solar sales people are largely ignorant of the best financing terms available for solar (FHA Title I, Powersaver Grant Programs, 203K loans, EEM's and various long term unsecured loans) and as such homeowners considering adding solar to their home are also largely unaware of these programs. Most homeowners still think they need to take out a home equity line or take an unsecured loan with horrible terms and solar installers are not doing the best job of changing that perception.

To have solar placed on your roof it needs to be your roof. The vast majority of people considering adding solar to their homes would not even own their home if the only mortgages available were 10 year loans with 10%+ rates. Affordable home financing made the dream of homeownership a reality for most homeowners today. It's the same with solar and as more of these loan programs become available and people are made aware of them more people will adopt solar...and that's a great thing. So please pardon me for thinking the discussion of copywrite is a bit silly. If your purpose is to gauge my intent there are better ways to do it.

I'll agree with your statement that most solar sales people are ignorant of the best financing terms available. I'd add that more than a few solar sales people are also ignorant about what they're selling or doing in general. I guess that qualifies them to work for a bank. My apologies to solar sales people who are not ignorant about what they're selling and whose jobs are made tougher by the ignorant ones.