Solar Panels have been gaining in popularity for the past eleven years. However, they were first invented as an electrical source in the 1950s, according to TIME magazine. Not until 2005, when the Congress passed the Energy Policy Act creating, among other standards  incentives for homeowners to have solar panels installed at their homes, did they begin to be popular among residents. The investment tax credit provides a tax credit of 30 percent of the value of the solar projects. The incentive was only supposed to last until the end of 2016, Congress recently extended the program. The Federal Tax Incentive was extended through 2019 with slow decline until 2022 when they become obsolete. While this may seem to be far into the distance, what are you missing out on with waiting for the deadline to approach? To explore this question we must discuss exactly what the product is and why it is beneficial to homeowners in San Diego.

What are Solar Panels and how do they work?

Solar Panels are multiple solar cells that are wired to circuits. When the light hits the solar cell, the energy is converted into energy that then flows through the circuit. Changing the direct current (DC) voltage received into alternating current (AC) allows our home appliances run.

Solar powers are most often placed on the roof of your home for convenience and access to the sunlight. The installation team will position the panels in the most optimal placements in order to obtain the highest amount of direct sunlight for the longest period of time throughout the day. Depending on the estate and location of the roof, it may be more beneficial to the homeowner to have the panels installed on the ground instead. Exploring all placement opportunities is key for the utmost benefit.

Benefits for Homeowners

There are many companies that have sprouted up in the wake of this bill offering financing of the panel installation and purchase. This is very helpful to homeowners who would like to lower their monthly bills, but do not have the capital readily available for such a large purchase. Many companies will create a new bill for the homeowner each monthly which combines their electrical use with the financing fee; this is often much less than what the homeowner was paying prior to the installation. The average homeowner saves $1,000 per year in electrical costs. Which includes the price of installing solar panels on their roof. With solar panels warrantied for 25 years, that is a savings of, at the very least, $25,000.

Homeowners living in California have a very enticing incentive due to the “aggressive initiative they placed to have 3,000 megawatts of new, solar produced electricity systems on rooftops by 2017, “ according to California allows homeowners to take advantage of both upfront rebates and ongoing incentives. This allows for residents to maximize their savings over time. There are also local incentives for homeowners to look into and take advantage of. To find out more information click here.

So what’s the downside?

The main disadvantages to obtain solar panels are:

  • No sunlight equates to no energy being produced.
  • When in minimal sunlight the efficiency reduces greatly.
  • Efficiency is impacted with extreme temperatures.
  • The tilt and direct of the solar panels needs to be optimal for best output.
  • High upfront costs with a long return on your investment may be discouraging. (Looking into grants, rebates, or financing will help with the upfront costs.)
  • They do require some general maintenance, i.e. going up on your roof once a year to hose them down and keep them clean.

How it Impacts Refinancing

Getting solar panels and entering into a contract to pay for them, or taking advantage of one of the government subsidized programs, can impact and potential impede a homeowner’s ability to refinance. Lenders will absolutely want a copy of the original solar contract and these can be a hassle or difficult to provide years later. Whatever the payment is, it will be factored in the debt to income ratio and taking against the qualifying income.

The 2nd issue to be aware of, is that the government programs usually will put a lien on title and this can cause challenges when it comes to refinancing. However, some mortgage lenders can work around this, I know we have been successful doing it. It all depends on the details, but the mortgage company will absolutely look into it and make sure the payment is counted and the title is clear for a new mortgage to be listed above the solar lien as priority. So you just want to make sure and communicate this to your mortgage broker/lender when discussing refinance opportunities.

Bottom Line

All in all, the solar panel movement has been designed by lawmakers to have the least impact on the homeowners. Allowing for a better source of energy, which is renewable and free to the environment, is a great option for residents. Looking into the project with the ample financing options, price packages, solar arrays, and government incentives to choose from is a smart step to saving money, upgrading your home, and best of all, helping out the environment. Check around in your local area for a solar specialist to help you through the process.

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.