Can I Refinance My House With Solar Panels?

Real estate markets naturally fluctuate over time, allowing homeowners to take advantage of lower interest rates and reduce their monthly payments on their existing residences. You might be curious if it’s beneficial – or even possible – to refinance your home with solar panels. The answer to this question is often a resounding “Yes!” In fact, these energy-efficient enhancements can offer a range of advantages during refinancing. However, outstanding solar loans and other financial hurdles may lower your potential for approval.

Before scheduling an appointment with your mortgage lender, you’ll want to understand how the refinancing process works and the steps to take to get the best return on your investment. 

Understanding the Impact of Solar Panels on Refinancing

As you prepare to refinance your home with solar panels, here are some of the impacts your energy-efficient array can provide: 

What Are Solar Panels?

Solar panels are sheets or panes, typically composed of silicon and glass, that are often installed on rooftops where they can soak up the sun’s rays throughout the day. Photovoltaic cells in these panels capture solar radiation, which becomes an electrical current. Then, an inverter converts this direct current (DC) energy into alternating current (AC) power, on which your home’s appliances, lights, and devices operate. 

Many solar panel arrays are connected to the electrical grid. Net metering programs allow homeowners to send excess energy back to the grid for even greater savings on personal utility bills and improved sustainability for the entire community. 

How Do Solar Panels Affect Home Appraisals?

Appraisers understand how high-quality solar panels can impact the terms of your new mortgage agreement. They will assess the financial value your system offers and how it may affect the structural integrity of your residence.  

When refinancing a home with solar panels, your appraiser will consider a wide range of factors to determine the value of your array, including: 

• The age of your solar panel array
• Energy production and system capacity
• Usage and kilowatt-hour (kWh) rate
• Monthly and annual savings on utility bills
• Remaining lifespan of the system
• The structural integrity of your roof
• Ownership and existing loans on the solar panel system

Benefits of Refinancing with Solar Panels

Before you refinance your home with solar panels, you’ll want to know all the benefits these systems provide, including: 

Increased Home Value

Homes with solar panels tend to have a higher market value than those relying solely on power from the electric company. In fact, a 2021 Zillow study found that houses with solar panel arrays sell for an average of 4.1% higher than comparable properties without these systems. 

Data from the National Renewable Energy Laboratory shows that with every $1 reduction in annual utility costs, the average home value increases by $20. In other words, if your solar panel system saves you $600 in electrical costs every year, it may add $12,000 to your home’s market value. 

These studies suggest that the addition of solar panels can increase your property value. As a result, this added value may help you secure more favorable refinancing rates and mortgage terms. 

Lower Utility Bills and Improved Energy Efficiency

The Zillow study above also found that over 80% of people in the market for a new home consider energy efficiency a top priority. An efficient solar panel array can lead to massive savings on utility bills, making your home more attractive to lenders. In turn, you may have a better chance of refinancing at a great rate. 

Long-Term Savings

EnergySage reports that solar panels can save the average American over $50,000 throughout the lifespan of the array. As you rack up the savings, your financial standing may improve, which can make you a more appealing candidate for lenders. After all, applicants with significant debt and other concerning financial problems may be turned down. 

Of course, it isn’t just lower utility bills that can put a little more cash in your pocket. State and federal tax incentives sweeten the deal even more. 

Potential for Green Loan Programs

Solar panels can improve your eligibility for various “green loan” programs offered to homeowners utilizing efficient energy solutions. These are typically available through private lenders. In some cases, these programs may enhance your ability to refinance with solar panels.

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Refinancing Options for Homes with Solar Panels

When you’re ready to refinance your home with solar panels, consider these options:

Conventional Mortgage Refinance

With a conventional mortgage refinance, you’ll essentially trade in your existing mortgage agreement for a new one with better terms. Depending on your situation, you may enjoy lower interest rates or shorter loan terms. Some allow you to ditch your mortgage insurance or pay smaller monthly payments. 

If you’ve accrued substantial equity in your home, as many with solar panels have, you may have the option of a cash-out refinance, which gives you access to the existing equity amount. 

Government Programs for Solar Homeowners

According to the Office of Energy Efficiency and Renewable Energy, many federal programs provide financial assistance to homeowners who use clean energy sources. Additionally, the US Department of Agriculture (USDA), the Department of Veterans Affairs (VA), and the Federal Housing Administration offer government-backed options to help you refinance your home with solar panels. 

Steps to Take Before Refinancing Your Home with Solar Panels

You’ll need to check a few boxes before scheduling an appraisal to refinance your home. Here are some of the steps to take: 

Check the Condition of Your Solar System

While a well-maintained solar panel system can help you refinance your home to achieve more favorable loan conditions, an outdated or poorly functioning array likely won’t do you any favors. Regularly cleaning and inspecting your rooftop solar panel system will ensure it’s functioning correctly and adding value to your property. 

Annual maintenance and professional inspections can go a long way to show lenders that your solar array is an asset. Before scheduling a new appraisal, be sure to have an expert look over your system and fix any existing issues. 

Evaluate Your Solar Loan

If you’re paying off the cost of your solar panel array using a loan, your lender may consider it a second mortgage. In turn, this can impact the terms of your new mortgage agreement and diminish the benefits of refinancing your home. However, paying off the remaining balance or consolidating your solar loans may solve the problem. 

Reach out to your creditor to learn more about the options available. They may be able to lift existing liens temporarily to facilitate the refinancing process. You might find that you can even refinance your solar panel loan to make the terms more favorable. 

Prepare for a Home Appraisal

Your home’s overall value is about much more than your solar panel system. Appraisers will inspect your home inside and out for signs of structural damage, aging electrical components, and other concerns. Routine maintenance can address many potential issues. Additionally, you might consider replacing old drafty windows with energy-efficient alternatives, updating outdated appliances, and swapping out old carpets with durable flooring. 

As you prepare for your home appraisal, schedule maintenance appointments and inspections with your electrician, HVAC specialist, pest control company, and other professionals who can identify and fix problems to enhance your home’s value. 

Successfully Refinancing Your Home with Solar Panels

The decision to refinance with solar panels can provide significant financial benefits, such as lower energy bills and increased home value. It’s important to ensure your solar panel system is in good condition and to address any existing solar loans. Exploring the right refinancing options will help you secure better terms, and preparing for the appraisal process can also boost your chances of a successful refinance. By taking these steps, you can make the most of your home’s solar investment.

At Solar Energy World, we’re committed to helping our clients enjoy the biggest possible return on their energy-efficient assets. Contact us today for a free solar estimate!nvironmentally friendly, setting a strong foundation for the years ahead.