Buying with Bank Financing

[russ]

I just don't see where it really matters in the grand scheme of things. It allows you to place your name on the document for free advertising - that is the purpose I suppose.

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.Only as long as the general public is paying a substantial portion of the cost - the low income people supporting those with more.

So please pardon me for thinking the discussion of copywrite is a bit silly. Feel as silly as you desire.

If your purpose is to gauge my intent there are better ways to do it.

I gauge your intent as advertising for Geneva Financing - nothing more and nothing less.

Nothing really new - any time someone decides to finance a purchase they need to learn the choices.

[EEMLoanGuy]

I gauge your intent as advertising for Geneva Financing - nothing more and nothing less.

Nothing really new - any time someone decides to finance a purchase they need to learn the choices.

That's partly my intent, sure. However, I also work in the capacity as a solar finance consultant and 90% of the time I'm advising people that a home mortgage is not their best option. I don't offer unsecured loans, Title I home improvement loans or stand alone HELOCS. I only offer Energy Efficient 1st Mortgage products and with the exception of new home purchases it rarely makes sense for homeowners to utilize the product unless they have an interest rate about .500% above the current market rates.

My primary intent is to encourage the adoption of solar PV. I'm what you might call an idealist and I think that solar PV is one small step that individuals can take to improve the world as a whole. (GASP) Crazy speak from a mortgage banker, I know.

Secondly, over 70% of people who make the decision to adopt solar are doing so utilizing a lease. The lease is sold as an "easy, worry free" way to adopt solar with no money out of pocket. In most cases nothing could be farther from the truth as people face resale issues, monthly payment escalations and generally the payments are higher than the comparable loan options. Being in home finance for over a decade I saw what the subprime mortgages did to individuals and communities and it was low and moderate income individuals who were hit the hardest. The solar leases have been structured and financed by some of the same people that structured and financed the subprime mortgages of the last decade and that concerns me.

I agree that there's nothing particularly new. Loans have been around for ages and Caveat emptor has applied ever since the first person decided to put their interests above all else, but we are continually learning from the past. Solar PV's price per watt has finally hit a point where the finance options of old now make sense. Just two years ago 100% loans would not cash flow and today they are they best finance option available. Most people, solar installers included don't know this, so while it's "nothing new", it's very relevant.

Look back through this thread. "Buying with Bank Financing", seven pages of content and not one post with a concise layout of all the programs available. Based upon that one might argue that it's a bit difficult to learn all the choices. Someone comes into the conversation who has knowledge to share and they are derided for being an advertiser "nothing more and nothing less". (Slow Golf Clap)

[EEMLoanGuy]

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.Only as long as the general public is paying a substantial portion of the cost - the low income people supporting those with more.

Just picked this out. Russ, stop being so cynical...the world really is not that bad!

I agree with you completely that low income households are getting the short end of the stick. Their tax dollars are subsidizing someones solar PV and as that other person decreases their dependence upon the utility the utility increases rates for their customers. It's a double whammy and it's not fair.

Where I disagree with you is where you make the assumption that the current paradigm will persist. Here is Arizona I'm seeing installed cost per watt down to $2.24...considering where prices were just a few short years ago that's HUGE. The industry does not need the subsidies anymore. They worked to incubate the industry up to this point and now it's time for the industry to stand on it's own. That still leaves the issue of the utility "death spiral" and it's affect on low and moderate income households... Look to Boulder Colorado as a great example of community coming together to address these issues.

[Ian S]

Just picked this out. Russ, stop being so cynical...the world really is not that bad!

I agree with you completely that low income households are getting the short end of the stick. Their tax dollars are subsidizing someones solar PV and as that other person decreases their dependence upon the utility the utility increases rates for their customers. It's a double whammy and it's not fair.

Where I disagree with you is where you make the assumption that the current paradigm will persist. Here is Arizona I'm seeing installed cost per watt down to $2.24...considering where prices were just a few short years ago that's HUGE. The industry does not need the subsidies anymore. They worked to incubate the industry up to this point and now it's time for the industry to stand on it's own. That still leaves the issue of the utility "death spiral" and it's affect on low and moderate income households... Look to Boulder Colorado as a great example of community coming together to address these issues.

First off you can complain about fairness with all manner of tax incentives. But, let's face it, low income households don't pay a lot in income taxes in the first place so the 30% tax credit comes mostly out of middle and upper class hides. The issue for the utilities is more significant but I think that can be addressed best by perhaps charging solar owners for the use of the grid as storage. The utility should be looking at that as a service they are providing and be able to charge accordingly.

Arizona is an interesting case. Installed costs are very low right now but the solar industry is apparently struggling.

As far as financing/purchase of solar is concerned, what would you recommend for those folks - usually older - who have limited income but significant savings available? In other words, they may not be able to actually make use of the tax credits if they purchase.

[EEMLoanGuy]

Arizona is an interesting case. Installed costs are very low right now but the solar industry is apparently struggling.

As far as financing/purchase of solar is concerned, what would you recommend for those folks - usually older - who have limited income but significant savings available? In other words, they may not be able to actually make use of the tax credits if they purchase.

Arizona is a very interesting case and many installers are struggling. Many installers are dependent upon the lease model and it's under fire in the media (home resale issues) and with a proposal by the department of revenue to tax leased systems. Additionally, some local utilities and some outside groups have put millions of dollars into lobbying against solar in Arizona. When you combine all of these challenges it creates a lot of doubt in homeowners minds.

In the case of older homeowners who do not have an appetite for the tax credits prepaid leases make the most sense. The FHA Title I loan program allows for the financing of pre-paid leases and if home equity is available that is an option as well. Additionally, in some limited cases a reverse mortgage may be a good option. So in this case the choice is between using a loan to pay for the PP lease or using cash savings. A financial planner is best poised to help them make that decision, but the general rule of thumb I use is this:

1. How important is it to retain those cash savings in the case of an emergency?
2. Can they achieve a better return on those savings than the interest rate available. I.E, if the interest rate available is 5%, but you can achieve a 10% ROI investing those funds elsewhere, utilize a loan. If the achievable ROI is less than 5% pay cash.

After working on a real estate transaction where an elderly woman went into foreclosure because she could not buyout her monthly lease and no buyer wanted to assume the lease payments I've been strongly opposed the monthly lease finance model.

[pleppik]

I gauge your intent as advertising for Geneva Financing - nothing more and nothing less.

Nothing really new - any time someone decides to finance a purchase they need to learn the choices.

Rather than gauging intent, I think it's more helpful to gauge how useful someone's contributions to the forum are. Of course I am not a moderator, but IMHO if someone is making a positive contribution and providing good information, it's fine by me if he also happens to be looking to raise his professional profile and maybe drum up some business.

It's the people who provide nothing helpful who need to be kept out.

[russ]

Rather than gauging intent, I think it's more helpful to gauge how useful someone's contributions to the forum are. Of course I am not a moderator, but IMHO if someone is making a positive contribution and providing good information, it's fine by me if he also happens to be looking to raise his professional profile and maybe drum up some business.

It's the people who provide nothing helpful who need to be kept out.

He is still allowed is he not? If people want to drum up business they can pay to advertise.

One can raise their professional profile on their own nickel.

[truav8r]

I'll chime in and bring this thread back on topic, because I fit the mold of the OP's question...

I'm awaiting installation of my roof mount system, hopefully up and running around the end of August. The net cost of the system after all rebates and incentives is about $25k (I'm going to use round numbers here for sake of discussion.) My installer has a program worked out with a local credit union for a solar loan. Terms are 20 years at 6.0%. I have excellent credit so qualification was easy.

Now some of you are probably thinking 6% is high (I thought so at first too) and that I won't own my panels for 20 years(!). But this works out nicely in my situation, and here's why...

My average electric bill is $150 per month (we have a Nissan Leaf that uses fully 1/3 of our electricity, great little car by the way). Borrowing $25k for 20 years at 6% is a monthly payment just shy of $180. My system is properly designed to produce all that we use in a year, actually I'm confident it will overproduce by a modest margin at least when new. So essentially my $150 electric bill will go to $0. Instead, I'll turn around and give that $150 to the credit union and kick in the extra $30. And yes, doing that for 20 years means I would pay roughly $18k in interest. But if I kick in just $1000 extra each year (say from tax rebate or whatever) that turns my 20 year loan into just over 11 years, for an effective interest rate closer to 3.25% or so. I can live with that. Yes, I'll still be paying something like $9k in interest, but when I compare that to the essentially free electricity I'll have for the next 30 or 40 years (save for the occasional inverter replacement) it still makes economic sense. And these numbers above assume the monthly electricity bill from the POCO never goes up, and what are the chances of that?

In the grand scheme of things, I'll be paying a modest amount of interest in return for decades of no cost/low cost electricity, and I didn't have to come up with $25k cash that most folks do not have lying around doing nothing.

If my electric bill was around $100, the math wouldn't be as favorable. And before we got our EV, that was about where we were. But our usage now is enough that it makes sense in this situation. And I'm certain I'll be an EV driver for life

So do the math, something similar could work for some of you.

[Naptown]

Is this a secured loan?
More important is can you deduct the interest.?

[truav8r]

Is this a secured loan?
More important is can you deduct the interest.?

Unsecured, other than against the panels themselves (if I don't pay the loan, the bank can come and rip the system off the roof)

This is a loan in a traditional sense, not a 2nd mortgage or HELOC, so no... The interest is not deductible.

Bottom line... I'm paying $9k (interest) over 11 years in return for at least another 20 years of essentially free electricity (easily $40k worth assuming 2% increase in utility rates). Not a bad rate of return.