Important Changes in Conventional Lending for Homes with Solar Panels


Filed under: Mortage Industry News


There are so many houses with solar panels now, especially since California is making it mandatory on new home construction. Recently, conventional lending has made some changes that you need to know about. We are starting to see these changes have an impact, so I thought it would be a good topic to discuss.

How Solar Can be Purchased

To understand how solar affects lending, you need to know the three main ways solar can be installed:

  1. Buy the Solar Panels
  2. Lease the Solar Panels
  3. Power Purchase Agreement

How Financing is Affected When Solar Panels are Purchased

If you choose the first option to buy the panels, then it means that you can pay for them outright, get a bank loan, or go through the HERO program. The HERO program means that a local company put the cost of the solar panels into your property tax assessment. Lenders don’t want to deal with that. So, what will happen is that a homeowner who paid for solar panels with HERO financing will need to pay that off before they can get lending for a purchase or refinance.

When the panels are paid outright, it means that they are yours – and there is no impact on lending. If you have a loan to fund the solar panels, then this is where the biggest change is occurring. Now, when the solar panels are in place, then a UCC filing is done. That gets recorded with the county. Then, the filing needs to be removed before a loan can be approved.

Additionally, now we need to create a combined loan to value ratio. If the buyer is taking on a solar loan on top of the price of the house, it will result in a combined loan. This change will really impact a lot of people, especially for those people who don’t have room in their financing to make that work.

Leases and Power Purchase Agreements

In terms of lease and power purchase agreements, you don’t actually own the solar panels. These situations are a little easier to deal with because there is no loan involved, you just have a monthly payment.

If you are buying or selling and have financed solar against the house, then it’s best to talk to a lender right away to know what options are available. Without doing a bit of footwork upfront, it’s possible that the deal could fall through. Contact me if you have questions or need to find the right solution for financing a home with solar panels.


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