Design Installation, Energy Systems Rochester NY - Solar Financing

Can I Get a Solar System Installed With No Money Down?

Solar Financing Rochester NY

Yes, it is entirely possible to have a solar array installed on your home with no money down. But beware… this should be a wise financial investment that works for your family, not just for the lessor. We’ll explain the liabilities of leasing later. Your far more advantaged financing options are listed below starting with the lowest interest rate:

  1. Home Equity Line of Credit (3.49% – 4.49%)
  2. NYSERDA Smart Energy Loan (3.49% – 5.99%)
  3. Sungage Financial (0% on Tax Credit Portion, 5.49% – 6.49% on remainder)

How Do They Actually Work?

Home Equity Line of Credit (3.49% – 4.49%)

If you already have a HELOC, or can apply for one quickly now, this is the most straightforward path of all because:

  1. You can use this to cover the full “Contract Cost”
  2. This includes the NYS and Federal Tax Credits
  3. It is truly zero money out of pocket.
  4. Once you receive the tax credit refund you can pay down that much of the loan.
  5. These loans can generally be paid down on an accelerated basis with no penalty.
  6. Using the savings from lower utility bills you can play the loan down on an accelerated basis to enhance your investment return.

NYSERDA – Smart Energy Loan (3.49% – 5.99%)

NYS offers a low interest rate loan that:

  1. Can cover up to $25,000 of the “Total System Cost.”
  2. The amount loaned is tied to the amount of power generated.
  3. There is a qualification process for the NY-Sun Smart Energy Loan.
  4. The interest rate will vary in relation to one’s income so the numbers need to be run to determine the exact interest rate.
  5. You can find your interest rate, loan approval criteria and application link here.

Sungage Financial (0% on Tax Credit Portion, 5.49% – 6.49% on remainder)

If the NYSERDA – Smart Energy Loan doesn’t cover the full “Contract Cost,” this is another option to achieve the zero out of pocket objective. The advantages of Sungage are that:

  1. It includes a loan for the Tax Credit Portion at 0% for 12 months.
  2. Approval is usually quick and seamless.
  3. We absorb the financing fees in the Sungage Gross System Cost so this can be zero out of pocket if desired.

Bottom Line:

Of course any financing negatively impacts your payback period and return on investment. Therefore if the project can be self-funded that is the better option. On the other hand with a payback period of 9.1 years and a return on investment of 15.3% (example used in incentives and tax credit piece) you’ve got a lot of leeway. So it really comes down to how best to leverage available cash flow now to create more positive cash flow in the future!

Would You Lead Me Through A Specific Example?

Sure, let’s use the same one we worked through for the “Incentives and Tax Credits” piece as follows:

  • A typical 2,000 square foot suburban home.
  • Using about 7,500 kWhr of electrical AC power per year.
  • We cover 98% of this usage with 18 roof mounted panels of 340 Watts each.
  • They generate a total of 6,120 KW of DC power or 7,344 kWhr of AC power

The top level numbers are as follows:

Total Project Costs
Total System Cost $20,250
NY-SUN Solar PV Rebate ($0.40/W)* -$2,488
Contract Cost $17,802
30% Federal Tax Credit* -$5,341
25% NYS Tax Credit ($5,000 maximum)* -$4,451
Effective Total Cost $8,011
25 Year Investment Benefits (Warranty Period)
Cash Payback (Years) 9.1
Annual Rate of Return (25 Years) 15.3%

Option #1: Home Equity Line Of Credit (3.5%)

Of course the best investment return (15.3%) is to pay the “Contract Cost” out of pocket. The next best investment return option may be to use your HELOC for the full “Contract Cost” if you have one, or apply for one now. In this case the numbers could be as follows:

Option #1: HELOC
Contract Cost $17,802
HELOC $17,802
Total Out of Pocket $0

In this case the “Out of Pocket” is $0. So that means your HELOC also covered all of the Tax Credits ($5,341 + $4,451 = $9,792). Once you do receive your tax refund you could pay that much of the loan down leaving your loan balance at approximately $8,011. You could then use the savings from lower utility bills to pay the $8,010 down on an accelerated basis to enhance your investment return.

As a side note, there are a couple of forward thinking cash flow management strategies that allow you to take your Tax Credits in the year of the installation, rather than waiting for a refund in the following year, as follows:

  • Employees: Significantly increase your deductions to pay less tax.
  • Self-Employed: Stop paying quarterly taxes.

Have questions about this strategy? Contact us and we’ll be happy to walk you through it.

Option #2: NYSERDA Smart Energy Loan (3.49% – 5.99%)

As discussed above NYS offers a low interest rate (3.49% – 5.99%) loan that can cover up to $25,000 of the “Total System Cost”. Remember, in this case the “Total System Cost” is $20,250, whereas the “Contract Cost” is $17,802. The amount loaned is tied to the amount of DC power generated too. In this specific case the numbers would play out as follows:

Option #2: NYSERDA Smart Energy Loan
Contract Cost $17,802
NYSERDA Smart Energy Loan (includes $150 application fee) $10,894
Customer Contribution required by NYSERDA  $7,058
Loan Processing Overhead Cost $500
Total Out of Pocket $7,558

In this case the “Out of Pocket” remaining is $7,558. If it’s too late to leverage the tax credit strategies mentioned above then once you receive your refund (Total Tax Credits = $5,341 + $4,451 = $9,792) you could use that to nearly pay off the loan ($10,894).

To reiterate, there is a qualification process for the NY-Sun Smart Energy Loan and it does vary in relation to one’s income.

Option #3: Sungage Financial (0% on Tax Credit Portion, 5.49% – 6.49% on remainder)

The next best investment return option to achieve a zero out of pocket cost is to use a Sungage Financial loan for which the numbers play out as follows:

Option #3: Sungage Financial Loan
Contract Cost $17,802
Financing Fee $1,453
Sungage Financial Loan includes financing fees $10,225
Tax Credit Loan Portion (0%) $9,792
Remaining Portion (5.49%) $9,463
Total Out of Pocket Cost $0

Conclusion:

I’ve tried to rank order these options from least to most interest rate. Keep in mind your actual interest rate will likely vary based on multiple factors. Again, with a payback period of 9.1 years and a return on investment of 15.3% you’ve got a lot of leeway. So, it really comes down to how best to leverage available cash flow now to create more positive cash flow in the future!

Next, on to leasing and why that is the least advantaged option of all…