With energy prices soaring, not to mention an increasing demand for reducing their carbon footprints, more homeowners in San Diego, CA than ever before are inquiring about the practicality of rooftop solar. The most pressing question many homeowners have is how they can afford the up-front costs associated with installing a rooftop solar system. That’s why we thought it’d be useful to go over the two primary solar financing models available today. Solar leases and solar finance loans are those options. Here’s an explanation of each and how to decide which option’s right for you.

All About Solar Leases

Just like a car lease, a solar lease is an arrangement you make with a bank, finance company, or solar power firm to cover the cost of your new rooftop solar system. In exchange, you agree to a set monthly lease payment for a predetermined period. Most solar leases have a term of 20 to 25 years, which means they involve a significant long-term financial commitment. However, a solar lease relieves qualified homeowners from having to make any upfront investment.

The most important thing to know about a solar lease is that you’re not paying toward ownership of your system. At the end of your lease term, you instead have three options to choose from. The first option is that you can allow the company that owns the system to remove it from your home. The second option is for you to purchase the system from its owner for a price that reflects its depreciation and approximate remaining lifespan, somewhat like a rent-to-own program. The third option is for you to extend the lease.

All About Solar Financing

Your other major option to cover the cost of a rooftop solar system is a loan. Solar loans give homeowners the option of financing their rooftop solar system while building equity in it as they pay. Unlike a solar lease, a solar loan arrangement means the homeowner owns the system when the loan’s satisfied. In that way, it’s much like the way you’d get a mortgage for a home you wish to buy: the bank provides the cash up front and you pay it back with interest.

In some cases, you can arrange for a solar loan without having to put any money down. However, most homeowners will need to put up some money to secure their loans. The good news is that the monthly payments on a solar loan are often lower than your home’s existing electric bills were to start with, meaning that you can still lower your monthly expenses even with one of these loans. You should know, though, that you’ll need a decent credit score for a solar loan to even be an option for you.

The Advantages and Disadvantages of a Solar Lease

Solar leases come with some additional benefits beyond the fact that you don’t have to pay anything upfront. Another major advantage is that you won’t have to worry about covering the costs of maintaining your home’s rooftop solar system. Since the company leasing it to you owns the system for the duration of your lease, they’ll be the ones maintaining it for you. Another benefit that comes with many solar lease agreements is a performance guarantee. This means the installer will estimate how much power your system should create each month. Then, if the system underperforms, the owner covers the difference.

Solar leases aren’t perfect, however. For example, since you don’t own a leased system, you won’t qualify for any tax rebates that might otherwise apply to a system you’re purchasing. Plus, the system’s owner will build a healthy profit margin into your monthly payments, so you won’t reap all of the rewards of the rooftop solar system. And, if you wish to sell your home during the lease, you’d either have to pay out the balance all at once or arrange to transfer it to your home’s new owners. Either way, a leased rooftop solar system complicates the job of selling your home.

The Advantages and Disadvantages of Solar Financing

Solar financing, in the form of a solar loan, comes with far more benefits to you, the homeowner. For one thing, you’re making monthly payments towards ownership of your rooftop solar system. And, since you’re purchasing it yourself, you may qualify for solar tax rebates and other cost savings. Plus, solar loans typically don’t last as long as solar leases. Most solar loans have payback periods between 5 and 15 years, depending on how high a monthly payment you’re willing to make.

Solar loans, however, aren’t something every homeowner can qualify for. Lenders will assess your financial situation, including how much money you owe on a mortgage, your income, and your credit rating. Those factors play a big role in the lender’s qualification decision, as well as the interest rate you’ll pay for the loan. Plus, you’ll have to worry about maintaining your rooftop solar system, even while you’re still paying it off. Although some types of insurance will cover major damage to your rooftop solar system, you’ll need to pay for minor repairs yourself. Over the term of your loan, that shouldn’t cost too much, but there are no guarantees.

How To Choose the Right Option

On balance, solar financing with a solar loan is the better way to purchase a rooftop solar system for your home. Besides giving you equity in the system, the shorter duration of a solar loan means you won’t have as many issues if you wish to sell your home. So, for homeowners that qualify, a solar loan is typically what we here at Friar's Heating and Air would recommend.

However, solar leases offer homeowners a way to get a rooftop solar system installed on their homes with a lower qualification bar to clear. Since the installer knows they’ll make money on the power generated by the system itself, they’re not taking very much of a risk. And, a leased rooftop solar system should still yield monthly savings to the homeowner in most cases. That makes them a useful and worthwhile option for homeowners that can’t qualify for a loan.

Come to the Solar Experts

If you’re interested in a new rooftop solar power system, no matter how you plan to finance it, the experts here at Friar's Heating and Air would be happy to help you. Our team has over 40 years of combined experience providing comprehensive HVAC installation, maintenance, and repair services, and we’re one of the premier solar power system contractors in the San Diego area. We also offer a variety of other useful services, including indoor air quality, HVAC zoning, and ductwork installation and maintenance. Plus, we may even be able to help you to finance any services you require. We can work with our financial partner and get you the revolving line of credit you need if you qualify.

So, if you’d like to know more about how a rooftop solar system can benefit your home, call the experts here at Friar's Heating and Air today to discuss your options with us!

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