property assessed clean energy (PACE) financing for solar

What is PACE financing for home solar power?

If you want to install a solar energy system on your property, one of the first questions you’ve probably asked is, “How will I pay for it?” There are many financing options available today for homeowners who want to enjoy the benefits of solar. In many areas, an increasingly popular option for home energy improvements like solar is Property Assessed Clean Energy (PACE) financing.

How does PACE financing work?

Property owners who aren’t able to or interested in buying solar panels in cash can finance their solar energy system with a solar loan or a solar lease or power purchase agreement. PACE financing is a special type of financing that is available in areas where the local government has allocated funds.

Here’s the general process for using Property Assessed Clean Energy (PACE) financing to install solar panels on your property:

  1. A county, local, or municipal government passes legislation that establishes a PACE program and makes funds available to investors, usually through the sale of municipal bonds.
  2. An authorized PACE lender (such as Renew Financial or Ygrene) provides those funds to property owners who want to make clean energy improvements, like installing solar panels on their home or business.
  3. Property owners repay the financial institution through an assessment attached to their annual property tax bill.

If you are a residential or a commercial property owner, you can use PACE financing to pay for new heating and cooling systems, insulation, and other energy efficiency upgrades in addition to solar panels.

What makes PACE financing different from other options?

While PACE financing provides homeowners with funds to make upgrades to their home, it is different from standard home improvement loans in a few important ways:

  1. Instead of repaying the loan in monthly installments, property owners pay their PACE funds back once a year for a fixed term (10-20 years) through an assessment that is added to their property tax bill.
  2. When you install solar panels using PACE financing, you immediately begin to enjoy the financial benefits of your solar panels without having to pay anything upfront. Because the amount of money that you save in electricity costs throughout the year will be significantly greater than the annual increase in your property taxes, you will always benefit from the net gains of your solar investment.
  3. If you sell your property before your solar energy system is completely paid off, the rest of the money owed transfers to the new property owner. Unlike most other loans or leases where transfers are negotiated separately, PACE financing is attached to the property itself, not the owner – simplifying the transfer process. Plus, the new owners won’t mind, as they’ll immediately enjoy the financial benefits of solar panels on their new property!
  4. While funding amounts and interest rates for traditional loans are determined by your credit, PACE financing amounts are determined by the tax capacity of your property (i.e., how much your property is worth). For property owners who don’t have good enough credit to access favorable loan options, PACE financing is a great alternative for receiving the financial benefits of solar with no upfront costs.

Why is now a good time to explore PACE financing for my home?

PACE financing is currently available for homeowners in California, Florida, and Missouri, and legislation exists in some form in 36 states plus Washington D.C. At the end of August 2015, the Obama Administration announced new actions that will remove barriers for residential PACE financing for single-family households.

While the Federal Housing Authority (FHA) initially warned investors against buying mortgages with PACE assessments attached to them the Administration’s recent actions show it’s changed its tune, and is now encouraging more municipalities to pursue PACE financing legislation.

Find out if PACE financing options are available near you, and don’t forget to compare your financing options when considering solar power for your household. For more about PACE financing, you can also download Department of Energy’s fact sheet about PACE programs.

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This post first appeared on Mother Earth News.

13 thoughts on “What is PACE financing for home solar power?

  1. Joey

    My PACE provider is charging an up front fee “Cost to buy down loan” of 18%. Is that legal under the PACE program?

  2. Helen Dvilac

    Please wait, until these loans are reviewed by the government. There are so many class action lawsuits going on right now. contractors are so deceptive and the financing companies go out of there way to avoid helping you. Please do your research and if it sounds to good to be true don’t sign. Never sign a contract, even if the give you 3 days. Have a family member look at the financing agreement that has background in loans. Have your mortgage company read and explain it to you. These loans are long term, high interest, with thousands in administration fee’s. Always do a back ground on the construction company, look their license up.

    You do not want to be paying for a construction project where the contractor cheated you and did not complete the work or put up a subpar solor system, does not work after a year, or they have done damage to your home. I guarantee the finance company will not help you.

    Please do not sign until you read everything and have others review. Don’t listen when they tell you, that you are going to miss tax credits, if you do not sign.

  3. Anthony C Russo

    Hello, My wife and I are very interested in solar power…However, we are not having any luck with solar companies due to low credit score..
    Unfortunately, we had to help our youngest son when he took ill… thus sacrificing our credit..Could we be eligible for PACE SERVICES


      If you’ve paid your Property Taxes for at least two years in a row and you live in a residential PACE State. You could be eligible for a PACE LOAN.

  4. Gregory Antalis

    If a PACE loan is not placed of record in the county recorder’s office but is only noted on the tax bill as an assessment, how does the unpaid amount not on the assessment get paid in the event of a foreclosure of a subsequent mortgage? Is the entire uppaid amount of the PACE loan a lien or is only the unpaid assessment a lien?> How does a bank considering a loan subordinate to an earlier PACE loan determine its priority if a foreclosure should later occur—behind the entire PACE loan or behind just the unpaid assessment?

  5. bluzy moro

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  6. Residential Solar Energy Systems Las Vegas

    Great article! thanks for sharing how to process finance to install our solar energy for our home.


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