Solar energy is one of the cleanest and most sustainable power sources, but installing solar panels can be expensive. While solar systems eventually pay for themselves in energy savings, the upfront cost can be a barrier for many homeowners. Thankfully, several financing options help you go solar without breaking the bank.

Ways to Finance Solar Panels

Leasing Solar Equipment

Leasing solar panels works a lot like leasing a car:

• How it works: You pay a fixed monthly amount (or a cost per unit of energy produced) to “rent” the solar equipment.
• Pros:
  • No upfront cost, making it a great option if you’re on a tight budget.
  • You still benefit from lower energy bills.
• Cons:
  • You don’t own the equipment.
  • Most leases last 20 years, which could make selling your home more complicated.

Home Equity Loans or Refinancing

If you have equity in your home, you can borrow against it to pay for solar panels.

• Home Equity Loan: Borrow a lump sum at a low interest rate.
• Cash-Out Refinance: You can replace your existing mortgage with a new one for a higher amount, giving you cash to pay for the solar system.
• Pros:
  • Low interest rates compared to other loans.
  • Potential tax benefits since mortgage and home equity loan interest are often tax-deductible.
• Cons:
  • Your home is used as collateral, so missed payments could risk foreclosure.

Solar Power Loans

Many solar panel companies now offer loans specifically for purchasing solar systems.

• How it works: These loans are often backed by banks or financing companies and are separate from your mortgage.
• Pros:
  • You own the system and can qualify for tax incentives.
  • No risk to your home equity.
  • Competitive interest rates, with the equipment acting as collateral.
• Cons:
  • Monthly payments might be slightly higher than leasing.

Property Assessed Clean Energy (PACE) Financing

Some local and state governments offer PACE loans to fund solar installations.

• How it works: You borrow and repay the money through slightly higher property tax bills over 10–20 years.
• Pros:
  • The loan is tied to the property, not your mortgage.
  • The loan transfers to the new owner if you sell your home.
• Cons:
  • Not available in all areas.
  • Your property taxes will increase while repaying the loan.

Government Incentives for Solar Projects

There are government programs that help offset the cost, which can make solar more affordable:

Solar Investment Tax Credit (ITC)

• How it works: The federal government offers a tax credit for 26% of the solar system installation cost (as of 2023).
• Who qualifies:
  • If you buy your system—outright or with a loan—you can claim the credit on your tax return.
  • If you lease the system, the solar company (not you) gets the tax credit.
• Important to know:
  • The tax credit is not refundable, but you can carry over unused credits to future tax years.
  • The percentage may decrease unless Congress extends it.

State and Local Subsidies

Many states and cities offer additional rebates, tax credits, or programs to encourage solar adoption. Check your local government or utility company’s website to see what’s available in your area.

Is Solar Right for You?

If you live in a sunny area with high energy costs, solar panels can save you money on electricity from day one. You’ll also contribute to a cleaner environment by reducing your carbon footprint.

Here’s how to decide:

• Budget: Consider whether buying, leasing, or financing works best for you.
• Incentives: Research federal, state, and local programs to lower costs.
• Energy savings: Calculate how much you’ll save on monthly energy bills to see how quickly your investment pays off.

Final Thoughts

Financing a solar home project doesn’t have to be overwhelming. Whether you lease, take out a loan, or use government-backed programs like PACE, there are options for every budget. By taking advantage of tax incentives and subsidies, you can make solar energy an affordable and smart investment for your home—and the planet!