How to Finance a residential solar system

One of the biggest challenges homeowners face when going solar is trying to figure out how to finance a residential solar system. This process can be intimidating, and many homeowners do not know where to start their search.

There are three options: cash/bank loan, leasing or solar financing.

Mission Solar has partnered with solar finance companies such as Mosaic, Dividend Solar, Renew Financial and Sungage Financial to offer attractive terms to finance a residential system. These companies have rigorously examined Mission Solar’s modules for inclusion in their approved vendor lists. The application process goes through a qualified installer of your choice.  It has never been easier for homeowners that need assistance to finance a residential solar system.

A residential solar system installed by IES Texas Solar.

Option 1: Self-finance or Bank Loan, Secured or Unsecured

Some homeowners are fortunate enough to finance the system on their own or through a bank loan, such as a home equity line of credit. Many homeowners are eligible to receive federal tax incentives and local rebates, which significantly helps to bring down the total cost of the system.

Solar loans are structured the same as other home equity or home improvement loans. The interest on secured solar loans (meaning the lender pledges an asset, such as their house) may be tax deductible, which could mean additional savings on the homeowners’ taxes.

Advantage: homeowners own the solar system and receive financial incentives, bringing in more savings in the long run.

Disadvantage: requires a substantial outlay of cash or qualification with the bank’s requirements on the home’s equity.        

Option 2: Third-party Owned Solar: Solar Lease or Power Purchase Agreement (PPA)

In a third-party owned solar system, the individual or company that finances a residential solar system is the legal owner of the unit. For this agreement, homeowners would house the system and the provider would be responsible for the installation, maintenance, monitoring and repairs of the system. In return, the providers receive the financial incentives for the solar installation. This includes local and federal tax credits and rebates.

In the instance of a solar lease, the homeowner would pay the solar provider a pre-determined monthly sum, regardless of how much electricity the solar panels produce. However, in a PPA, homeowners would pay a pre-determined monthly amount for the energy the solar system produces (rather than a flat amount like in a solar lease). Solar leases and PPA typically include an annual escalation factor on the monthly payments, thereby eroding homeowners’ total savings.

Advantage: little to no money down.

Disadvantage: low return on investment, homeowners don’t receive local and federal government incentives, and do not own the solar system. This could potentially lead to issues when selling the home.

Option 3: Solar Financing Companies

Solar financing companies allow homeowners to finance a residential solar system with zero money down and receive financial incentives such as the federal tax credit. This tax credit covers up to 30% of the solar system costs through the end of 2019.

Mission Solar Energy is working closely with solar financing companies to make our panels more accessible to homeowners. Recently listed on Mosaic, Dividend Solar, Renew Financial and Sungage Financial’s approved vendor lists, Mission Solar Energy has proven that our modules are not only high quality, but a good investment for homeowners.

Trevor Udwin, Product Manager at Mission Solar Energy, and his team have lead the efforts in getting Mission Solar Energy listed on solar financing companies’ preferred vendor lists.

“In order to be listed on an approved vendor list we had to submit testing data that demonstrates the quality of our panels in real-world conditions,” said Udwin. “Our high-quality solar modules meet over three times the International Electrotechnical Commission (IEC) standards, and all of modules are independently tested by third-party laboratories.”

In addition to demonstrating the quality of our solar modules, Mission Solar Energy was required to demonstrate the financial stability of the company. This was accomplished by providing the consolidated balance statement of our parent firm, OCI Company. Additionally, Mission Solar Energy also submitted the most recent Black & Veatch IE report that addresses all production processes and quality checks, a list of reference projects and third-party insurance (PowerGuard).

Advantage: homeowners own the system and receive the financial benefits and tax incentives. With solar financing companies there is a streamlined application process and an instant credit decision, with $0 down and no lien homes.

Disadvantage: some solar financing companies raise the interest rate if certain payment conditions are not met. (For example, some companies may raise your monthly payment if 30% of the system is not paid for in 18 months.)

For more information about MSE PERC 60, our most popular module used in residential solar systems, click here.