Just like everything else many homeowners are surprised to know they have options. The below order is the order that makes the most financial sense in our opinion. All of them are better than staying with the Utility Company!
- Cash: 75% of our business is cash. We believe it’s because we do a great job of educating customers of the advantages of all their options.
- HELOC: HELOC is a home equity line of credit. Most solar companies will not suggest this as it will prolong the job usually by months. We do not care when you go solar, we want you to make the best financial decision for you and your family. Keep in mind if we (meaning solar companies) can pick up the phone and get you $50,000 immediately, it’s probably not your best option. The nice thing about HELOC is that it’s secured and you can write the interest off.
- SDMCU (San Diego Metropolitan Credit Union): SDCMU offers a secured loan so you are able to write off the interest. All of the options require zero money out of pocket. They have 5,10,12,15 and 20-year terms. Currently the most popular is the 12 year at 1.89%. However, they charge us (solar companies) a dealer fee to offer the different loans. So while the 1.89% sounds great they hit us with a 15.5% dealer fee which is added to the cash price. All the other options have higher interest rates but dealer fees are only 3%, similar to the fee we are charged to swipe a credit card. The difference in payment for example between the 12-year term and 20-year is about 15 dollars so most customers still choose the 12-year. The most popular option these days is 12 years at 5.49% with no fees or points. The other benefit is that SDMCU allows a one-time buy down of the loan without penalty. Most customers will do this with the 30% Tax credit further reducing the payments. Payments are typically lower than your utility bill, locking in your electrical cost for the next 25 years. As the Utility rates increase, your payments stay the same and your savings get better.
- Pace funding (Figtree, HERO, California First, Ygrene): This is a zero money out of pocket option that gets added to your property taxes. The real benefit is it does not go against your DTI (Debt to Income Ratio) preventing future loans. While it is a secured loan you can only write the interest off, not the full payment as some companies will lead you to believe. The interest rates are higher than SDMCU and there are fees associated with it. It will also be tough to refinance your home as some lenders will require this to be paid off first. Some solar companies will lead you to believe it simply transfers with the sale of the home. Again, often banks will require having it paid off first.
- Lease– Palomar Solar has not sold a lease or PPA in three years. They simply no longer make sense. Five years ago you either had cash or a lease that was it. Nowadays you have options and once educated no one chooses a lease. Look at Solar City (Now Tesla) for example. They are scrambling to come up with other options because their leases no longer make financial sense in the competitive finance landscape.