Why you should consider PACE Financing
Why I think everyone going solar should consider using a PACE program for financing their home upgrades.
Every homeowner has an option of financing when making the switch to solar. The post is to list the benefits of programs such as HERO and California First Finance. Remember, it is not the only financing option when considering solar, just one of my favorites. And here is why I love these programs.
Why are programs such as California First and HERO my favorite financing options?
One word, write-off!
When you pay cash for a solar system, you get a federal tax credit of 30% of the gross system cost. Not everyone has $25,000 in cash just lying around waiting to be spent on a solar system. So if you are one of the many who need to finance your solar project, this is a great way to get write offs.
The cost of the solar project gets broken up into 5, 10, 15, 20 or 25 years. Only California First offers 25 years, HERO only goes up to 20 years. Those payments are broken up into your property tax. So, if your system costs $25,000, and you chose the 20 year option, $3,116 will be added to your property tax every year. Here is where these programs start to benefit you as a homeowner. Depending on your tax bracket, you can write off that full payment on your property tax(example below).
So if you're in the 25% tax bracket(example below), you will get $1,031 of that $3,116 back! How does this work? What these programs do is add your financing amount as a line item to your property tax. So when you file your taxes at the end of the year, you just include the amount that was added to your property tax via HERO or California First. Every year, until your system is paid off. This is great for those who get slammed with taxes at the end of the year and are always looking for write offs. This is something you can't do with leases, bank loans, or your utility bill.
It is part of your home, not you.
So if later on you went and got a new car, the loan amount that is through these programs, will not show up as debt owed on your credit. Another benefit of this is when you go to sell your home and you still owe on the system. The new owners can take over and resume your payments from wherever you left off. The other options the have is rolling the cost remaining on the system into Escrow and pay it off that way.
Now there are some qualifications HERO and California First have for their program
Specific eligibility requirements for residential properties include the following:
1.All mortgage-related debt must not exceed 90% of the value of the property.
2.Mortgage payments must be current at the time of application, and homeowner(s) must not have had more than (1) 30-day mortgage late payment over the past twelve months
3.Property taxes must be current and there must be no more than one late payment in the past three years.
4.No outstanding involuntary liens, such as tax liens or mechanic's liens.
5.Homeowner(s) must not have had any active bankruptcies within the last seven years, and the property must not be an asset in an active bankruptcy. However, if a bankruptcy was discharged between two and seven years prior, and the homeowner(s) have not had any additional late payments more than 60 days past due in the last 24 months, the homeowner may be approved.
6.Mobile homes must be permanently attached to the property and the owner of the underlying property must be the applicant and be subject to real property taxes
If you would like to learn more or see if you qualify, email me at info@justinosmer.com and we can schedule a consultation. Just like other programs not everyone qualifies. It's best to know all of your options before going solar.
Here are some samples of property taxes, state and federal tax rates and IRS code.
