Alternative ways to pay for solar

Adding solar to your home almost always pays off! However, assuming you purchase your solar system, you'll have to provide an upfront cash payment or monthly payments (like if you choose a $0 down loan). While there are several options to finance solar panels for your home, there are a few things you'll need to be aware of to select the best option for you. In this article, we'll discuss some alternative solar financing options you may not know about!

Disclaimer: This article is intended to provide an informational overview of solar loan fees for interested homeowners. It is not intended to serve as official financial guidance. If you're interested in installing a solar system, you should use your best judgment and seek advice from a licensed professional before making any purchase or investment.

The average solar panel installation cost in the U.S. is over $20,000, so many homeowners use solar financing. If you're looking for alternatives to a traditional loan, there are options to consider. Like with any significant purchase, you'll want to understand the terms and conditions and any fees associated with your solar financing. Here are some ways to get started in exploring your options:

Check ratings and reviews

Regardless of the route you take, you'll want to make sure whichever lender or financier you use is reputable and has a solid track record. You can check out reviews on EnergySage, Google, or TrustPilot.

Look at local options

You may have local credit unions that aren't necessarily your go-to lending option. However, many credit unions offer benefits like more personalized service, less red tape for approval, and competitive rates. They are also not-for-profit businesses that focus on their members (customers). The National Credit Union Administration, part of the U.S. government, offers a credit union locator to find credit unions near you.

See if you have green banks in your area

State and local governments establish green banks to help residents and business owners have options for funding green upgrades to their homes and businesses. Often they may provide additional opportunities to get financing for renewable projects like installing a solar system or heat pumps – sometimes with lower credit requirements or more competitive interest rates. Each green bank is different, so you'll have to see if you have a green bank in your area and what specific financing options they offer.

If you're not looking for a loan, leveraging your home's equity may be another option to fund your solar installation. Some commonly used options include a home equity line of credit (HELOC) or a home equity loan to make home upgrades like adding solar. However, you'll need to have equity built up in your home, and you will still need to make sure you can cover additional monthly payments for these options in your budget.

Hometap

One newer option available to you comes via Hometap, a startup that helps you leverage a home equity investment to fund solar. This unique option works similarly to how an entrepreneur might get an investor in their business: equity is exchanged for an investment. In this case, Hometap provides a home equity investment to you as a homeowner in exchange for equity in your home.

Please note: Hometap is a partner of EnergySage.

Hometap's investment offering

A Hometap investment has a 10-year term. At the end of that period, you can either buy out their investment with savings, take out a home equity (or other) loan, or sell your house during the effective period to settle the investment. You can use money from a Hometap investment towards various things, including installing solar panels or high-efficiency heating and cooling equipment like heat pumps. You can even use the funds to complete home projects.

What makes Hometap stand out?

Unlike other solar loans, financing, or lines of credit, with Hometap, you don't have any monthly payments. You can also qualify with a lower credit score (sometimes as low as a 500 FICO Score vs. a 620 credit score compared to most solar lenders), and your debt-to-income ratio isn't a factor like most loans.

Hometap is also very transparent about its fees. Closing costs and fees are deducted from your investment total, so there is no down payment. Hometap charges a fee of 3 percent of the investment amount for arranging and funding the investment. There are no other Hometap fees; however, the appraisal and additional third-party costs associated with the signing (i.e., escrow, attorney/notary, and document recording) are deducted from the investment amount. Costs like appraisal, title charges, and government recordings can vary by state. Hometap's offering is intended to help you leverage your home's equity without making payments, taking out a loan, or obtaining a line of credit. There are also no prepayment penalties.

Who is eligible for a Hometap investment?

Your single-family home or condo must be located in one of the following 18 states to qualify with Hometap: Arizona, California, Florida, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, South Carolina, Pennsylvania, Utah, Virginia, or Washington. You must also have a minimum FICO Score of 500 and 25 percent equity in your home. There is an approval process that may take up to three weeks.

The best solar financing option depends on your location and financial situation. Selecting your solar equipment, getting various solar loan options, and exploring alternative financing methods are the best ways to see what's available. Make sure you understand any solar loan fees and terms, look at reviews on the company you're working with and make sure you're comfortable with the monthly and total payment. Working with a trusted installer and financier will help ensure you're satisfied with your solar purchasing and financing decisions.

Is financing solar a good idea?

Often, yes. It'll just depend on your specific circumstances. Often your monthly loan payments will be lower than your monthly electricity bills pre-solar, allowing you to start saving on day one – and once you repay your loan, you'll often have energy free of charge! 

What is a finance charge on a solar loan?

Your finance charge or interest rate on a solar loan will vary depending on a few factors, including the type of loan (secured or unsecured), your credit score and current debt, and the current U.S. Federal Reserve (the Fed) rate. Your annual percentage rate for solar may be approximately 4 – 5 percent.

What are common solar loan fees?

There's no standard when it comes to solar loan fees. You'll need to confirm with prospective lenders what closing or lender fees they charge to administer and manage your loan. You can contact trusted lenders to learn more about their requirements, get pre-approved, and see what terms you might qualify for with a solar loan.

You can join EnergySage today for free to connect with installers in your area who offer financing options or work with trusted local solar lenders. Through your EnergySage account, you can compare multiple quotes and financing options. Want to see who offers solar financing near you? Search for lenders in your area.