Solar Panels Are Everywhere. How do they impact mortgage financing?
It’s April and in honor of Earth Day we are going to have an environmental focus on our next few installments!
I was out and about last week and in just few blocks sighted 6 homes in our neighborhood with solar panels. As the daughter of an early environmentalist, seeing so many houses with solar power supplementation excited me. As a mortgage professional I wondered how having solar power might impact the mortgage qualification process.
According to www.CostofSolar.com, updating your home to solar panels as your home’s energy source can save a homeowner on average $20,000 over the course of 20 years. “Residents in some states with high electricity prices can expect to save much more than that – consider Hawaii, where residents save on average $64,000 after 20 years.”
While further researching this topic, I found there are mortgage rules surrounding solar panels to keep in mind when investing in alternative energy production.
The biggest question to remember when thinking about updating your home to a solar panel system: does the homeowner own the solar panels or is the equipment leased or being paid for under an agreement with the solar company?
If you own your solar equipment you should be fine to sell your home later at any time. Complications can arise when you do not own the equipment. I would suggest that if you consider installing solar power, have a lender review the contract to determine if there could be any issues with future financing. Leasing solar panels can make an impact should you decide to sell your home at a later date.
Complications that can arise with leased solar equipment:
• The solar panels may not be included in the appraised value of the property
• The buyer may have to qualify with the solar lease payment included in their ratio
• Traditional electrical services to the house must be maintained and functional
• There are insurance requirements, and other issues to address that make financing a property with leased solar equipment more challenging
Agents, if you are listing a property with solar power, call me early on to determine any possible complications to a future buyer. Some solar providers have created contracts and lease agreements that are suitable to lending requirements, but you want to know what you are dealing with out of the gate. Here is an article on this subject from the LA Times that you might find interesting.
On another note:
Realtors in this busy spring market if you have a favorite loan originator who you think would enjoy the Wintrust platform, send them our way!
Regional Vice President
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