It’s a no-brainer, right? We all know that green is the thing! With Hawaii’s goal of becoming energy independent, you’d think that adding panels that create energy using the power of the sun would be a no brainer. Let’s review. Photovoltaic panels create energy that can either be “sold” back to HELCO or stored on-site. Purchasing a system can be expensive. For this reason, some homeowners choose leased systems.
About Leased Solar
Besides low initial outlay, the advantages of a leased system are free maintenance during the lease and affordable monthly payments. With leased systems, homeowners do not normally benefit from any tax credits. If repairs are required, owners are solely at the mercy of the leasing company. REALTORS® normally regard any PV system as a huge selling point but it’s an understatement to say that any system can complicate the loan process. Mortgaged properties normally require connection to a conventional source of power. Different loans treat payments for either leased or financed systems differently. At times payments do not impact a buyer’s ability to qualify. This means it is imperative to check with the lender up front if a buyer’s ratios are tight.
Concessions and Credits
In addition, some loans regard the cost of the system as a concession. Concessions and credits are limited on any loan program. When a system is owned, most appraisers absolutely give it value. Not so with leased systems. When off-grid is common to an area, a conventional power back-up may not be required but a back-up system will still likely be needed. Lease payments with conventional loans (other than government backed VA, FHA, USDA), are part of the qualifying ratio so are included in the debt ratio just like car or credit card payments.
Leases also must be a fixed payment for a certain period of time and a production guarantee is required unless there is a power purchase agreement based on usage. In this case, the payment is treated as a utility payment and not included as part of the buyer’s ability to qualify. Another potential hiccup that could surface is that a third party vendor cannot be named as a loss payee or named insured on the property insurance policy. The vendor will also need to agree to termination and removal of the panels if the property is foreclosed.
Buying a Home With a PV System
Remember, a financed system becomes an encumbrance on title that will likely need to be cleared or re-subordinated upon sale. Confused…me too! For now, one thing is for sure. If you are buying a home with a PV system, get your lender involved early on. They have a much better understanding of the issue. What I do know, for now, is that even with the best of intentions, going GREEN isn’t always as easy as you may think!