Understanding How Pace Loans Can Help With Home Solar Panels
Understanding how PACE Loans can Help with Home Solar Panels
Go Green around your home with help from a PACE loan. Here's what to look out for.
I recently inquired about having solar panels put on my home to reduce the cost of our electric. My goal is to leave a smaller footprint, increase the value of my home and decrease our expenses. I was told that I could take out a PACE (Property Assessed Clean Energy) loan. I am not sure what a PACE loan is and how it works. I was told that it could be added to my property taxes. Can you explain the program?
It is admirable that you are looking to “go green!”. A PACE loan, also called a green loan, is a loan that allows you to borrow money in order to purchase and have installed energy -efficient products and make clean energy improvements to your home. PACE programs are not available in every state and municipality. The loan is typically repaid over a period of time (8-25 years) through the annual assessment on your property tax bill.
Many of the companies involved with this program report that the homeowner should see a monthly savings that outweighs the monthly cost of the PACE loan. However, this is up for debate. There have been recent articles published in which homeowners did not feel they were seeing the level of savings promised by the contractors. In addition, the PACE loan is a super lien. Essentially, even if monthly mortgage payments are made, the home could be placed in foreclosure if monthly payments are missed on the PACE loan. Currently, the PACE loan does not require the Truth In Lending Act Disclosure nor does it need to follow the same rules as other forms of home financing.
The other side to this argument is that the PACE loans allow homeowners the opportunity to make environmentally sound improvements to their home. Many of the contractors feel strongly that the loan is well worth the cost, as the improvements, such as solar panels, will provide financial savings. My recommendation is to investigate the PACE program thoroughly. Check the interest rates and make sure that the improvements you are making will not be obsolete in several years. There is legislation before the Senate called the Protecting Americans from Credit Exploitation Act which would provide more oversight relative to these loans.
Kim Cole is the Education Outreach Coordinator for Navicore Solutions. Kim provides financial education workshops and seminars to communities. Readers can submit general questions relating to personal finance, credit scoring, debt management, student loans, home finance or bankruptcy which may be highlighted in the next month's edition. All identifying information will be kept anonymous.
Please send your questions via email to DearKim@navicoresolutions.org