PvValue Creator: Solar Installations can be Financed Through the Mortgage

Solar Installations can be Financed Through the Mortgage

The discussion about interest rates available for financing begs the question about the role of appraisers in helping homeowner’s access lower interest rates typically available for first mortgages. Consider a loan product that allows for the inclusion of a PV system value into the loan to value ratio for the borrower based on the understanding the PV system will reduce electricity costs as a function of the market value of the energy produced.

...however for solar if an as-installed value could be developed before the solar is installed with current appraisal approaches, new conventional 1st mortgage loan products could then be developed with lower rates that allow for the installation of a PV system after the home is purchased or refinanced.

For example, strict risk-based rules would most likely need to be implemented to protect the interest of both the lender and borrower such as:

1. escrowing of funds with bonded escrow agent,
2. approval of bonded and licensed contractor to install the system,
3. funds should be subject to normal program LTV guidelines,
4. additional loan payment < 90% of estimated monthly savings from PV energy generation (proof of positive economic benefit), or percent acceptable to GSE’s,
5. roof less than 5 years old, or determination that remaining useful roof life > (reasonable %) useful life of PV system, and
6. no mortgage funds allowed to monetize incentives (rebates or tax credits, etc.).

The product discussed above is an example of how access to lower rates could be achieved specifically for PV systems, and further dialogue between the GSE’s and the Appraisal industry would need to take place. In addition, costs would most likely need to decline further from current levels and value for PV systems would need to be recognized before these products could be created and offered to consumers. It is anticipated, according to lending industry sources, that a minimum of US $400M per quarter would be required to develop a new product which based on current average national loan size of ~$230k would translate into ~1,800 new loans per quarter in demand from interested consumers who want to own and finance a PV system with the purchase of refinance of their home. As underwriters begin to accept valuations of PV systems developed by appraisers then products like this would be feasible.

Reposted from original OSTI Sandia National Laboratories/NNSA link.