HERO solar program: The pros and cons

The HERO Loan Program by Renovate America is one of the most popular energy loan options in California. HERO loans offer reasonable interest rates that make it possible to fund energy upgrades like new windows and updated HVAC systems. Homeowners and businesses in hundreds of communities across the state have used HERO loans to make clean energy upgrades to their properties. One of the most popular uses for HERO loans is to reduce energy bills by installing solar panels.

To provide some baseline information on HERO loans, we evaluated all of the solar quotes submitted by installers to shoppers on EnergySage that included HERO loan options. Data from homeowners comparing their solar options on the EnergySage Marketplace shows that the HERO Program loan offers a range of interest rates and term lengths.

In many places, loans like the HERO program offer are used for commercial properties as well as residential properties, and the loan amount can be significant. Solar shoppers on EnergySage were offered HERO loans for as little as $7,000 and as much as $237,000.

HERO solar program interest rates and terms

Most solar loans are similar to other types of loans a property owner would use to finance home improvement projects. The HERO program, however, is unlike a standard solar loan. It's a Property-Assessed Clean Energy (PACE) loan, which has a few practical differences that can make a big impact.

Annual payments

Property owners with a standard solar loan repay the amount they owe in monthly installments. With a HERO loan, you pay the loan back once a year for a fixed term (5-25 years) through an assessment that is added to your property tax bill. Many property owners find this appealing for a simple reason: a single annual payment, rather than monthly payments, means you can immediately start to benefit from your solar savings.

In many cases, the amount of money that you save in electricity costs throughout the year will be greater than the annual increase in your property taxes. As a result, you can benefit from the net gains of your solar investment starting on day one.

The loan is attached to your home, not you

Homeowners who take out a traditional loan to finance their solar energy system are obligated to repay the full amount of the loan even in the event that they sell their home. This isn't typically a problem – solar actually increases your home value, and most homeowners will increase the sale price of their home enough to repay the loan without a problem after they've sold their property. However, that isn't always a guarantee.

PACE loans remove this variable entirely from the home sale process. Unlike more traditional loans, PACE loans are attached to the property itself, not the individual borrower. If you sell your property before your solar energy system is completely paid off, the rest of the money owed transfers to the new property owner.

Your eligibility depends on your tax capacity

The eligibility criteria for HERO loans are also different from other solar loans. While funding amounts and interest rates for traditional loans are determined by your credit, PACE loan amounts are determined by the tax capacity of your property (i.e., how much your property is worth). For property owners who don't have high enough credit scores to access favorable loan options, HERO program financing is a great alternative for receiving the financial benefits of solar with no upfront costs.

As an added benefit, in many cases, the interest on PACE loans is tax deductible because it's considered part of your property taxes. (Note that we at EnergySage aren't accountants, and we encourage you to confirm the specifics of your situation with your tax advisor before finalizing your decision.)

With any major home purchase, reviewing multiple offers is the best way to find the right option for your home, and this includes solar loan offers. When you join the EnergySage Marketplace, you can easily request solar quotes that include HERO loan options from solar installers by specifying your interest in your profile preferences.

EnergySage's quote comparison tables make it easy to evaluate the comparative economics of all of your solar financing options. By comparing options on EnergySage, you can save thousands of dollars on the cost of your solar PV system and ensure that you're getting the most out of your solar investment.