The House of Representatives passed President Joe Biden’s signature spending plan, Build Back Better, which the White House called “the biggest climate change effort in American history.” Part of that effort is an investment in green energy like electric vehicles and residential solar panels.
The bill’s current framework will reduce the cost of installing rooftop solar panels by about 30% through a new and improved rebate program and increased federal tax credits. This will make solar power more accessible to homeowners and save the average American family hundreds of dollars a year on their electricity bills, the White House estimates.
However, installing solar panels can lead to significant upfront costs. Keep reading to learn more about how to pay for solar panels, including home equity financing and unsecured loans. Visit Credible to compare interest rates on a variety of financial products, including mortgage refinancing and unsecured personal loans.
BUILD BACK MIEUX EXTENDS VEHICLE TAX CREDIT WITH $ 12.5K INCENTIVE ON US-MANUFACTURED ELECTRIC CARS
3 ways to pay for the installation of solar panels
Under current federal tax incentives, the average cost of installing solar panels in the United States is around $ 12,000, according to Consumer Affairs. Biden’s Build Back Better Act Would Effectively Reduce These Upfront Costs Significantly in the form of increased tax credits. But keep in mind that Build Back Better still has to go through the Senate, where it is subject to review, before it can be enacted.
There are several factors that will affect the final cost of installing solar panels in your home, including your electrical needs, the type of panels you choose, where you live, and the size of your home. A small solar panel can cost as little as $ 5,000, while a more advanced residential solar power system can cost as much as $ 40,000, Consumer Affairs estimates.
Here are some popular solar panel financing options to choose from:
- Mortgage refinancing in cash
- Home equity loans and HELOC
- Personal loans
Learn more about each type of home improvement loan in the sections below.
REFINANCING AN FHA LOAN? HERE’S EVERYTHING YOU NEED TO KNOW
1. Mortgage refinancing with withdrawal
Mortgage refinancing involves taking out a new mortgage with better terms to pay off your current home loan. Refinancing can help you lower your monthly payments, pay off your mortgage faster, or even gain equity in your home.
Cash-out refinancing allows you to take out a mortgage that is worth more than the current value of your home so that you can access the difference in the form of a lump sum. Since mortgage rates are still relatively low, according to Freddie Mac, it may be possible to tap into the equity in your home without increasing your monthly mortgage payments.
Plus, you may be able to deduct the interest on your refinance withdrawal on your taxes. The Internal Revenue Service (IRS) allows homeowners to claim tax benefits for home improvements that significantly increase a home’s value, such as clean energy improvements.
Keep in mind that mortgage refinancing has a few drawbacks. You will have to pay closing costs, which are typically between 2% and 5% of the loan amount, according to Credible. Plus, if your new loan puts you below the 20% down payment threshold, you may need to pay for private mortgage insurance (PMI).
Visit Credible to compare mortgage refinance rates without affecting your credit score. Then calculate your new monthly payment to decide if this option is right for you.
FANNIE MAE EXECUTIVE: THE 3 REASONS WHY OWNERS SHOULD REFINANCE
2. Home equity loans and HELOC
Home equity loans and Home Equity Lines of Credit (HELOCs), also known as second mortgages, are financing options that you take out in addition to your current home loan. Unlike mortgage refinancing with withdrawal, you will keep the original conditions of your mortgage and take out a new loan with its own monthly payment.
The main advantage of home equity loans and HELOCs over cash refinancing is that you may not have to pay closing costs. Some home equity lenders will cover closing costs, which is not the case with cash mortgage refinancing.
However, interest rates are generally higher for home equity loans and HELOCs than for mortgage refinancing, which can make them a more expensive financing option.
You can view the current mortgage refinance rates in the table below.
PERSONAL LOAN VS. CREDIT CARD – WHEN TO USE EACH
3. Personal loans
A personal loan is a type of unsecured loan that allows you to borrow a lump sum of cash without pledging your home as collateral, meaning you won’t risk losing the roof over your head in the event of default. of payment. This relatively low risk makes personal loans a popular choice for homeowners who need cash to finance home renovations.
Personal loans carry slightly higher interest rates than secured options like home equity loans and mortgage refinancing because there is no collateral to be entered if a borrower does not repay the loan. Instead, lenders determine interest rates and personal loan eligibility based on the creditworthiness of the borrower. Consumers with excellent credit will qualify for the lowest possible rates.
Fortunately, personal loan rates are near historic lows, according to the Federal Reserve. So now is a good time to take out a personal loan to pay for renovations like solar panels.
If you decide to borrow a personal loan to finance the installation of solar panels, it is important to compare the interest rates of several lenders to ensure that you are getting the lowest possible rate for your situation. Visit Credible for free personal loan offers and repayment terms.
PERSONAL LOANS ORIGINATION COSTS: ARE THEY WORTH THE COST?
Have a finance-related question, but you don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.