Fannie Mae Agrees: Solar is a MUST-DO for homeowners
Just last month, Mortgage Giant Fannie Mae announced their new mortgage option that allows solar energy projects to be rolled into the final mortgage amount. Namely, the HomeStyle Energy Program is hot news for solar fans who use a Fannie Mae-approved lender for their mortgage; whether considering a first-time solar system purchase, or currently financing an existing solar system with an equity line of credit or unsecured loan.
Typical Solar Financing and Solar Energy
It’s no secret that solar energy system installations in Maryland and Washington DC have taken off like gangbusters. In previous years, many Maryland homeowners were choosing to lease/rent solar panels in an effort to avoid upfront costs. However, when compared with an outright solar purchase – a 20yr (or similar) solar lease proves to be quite expensive – as with most rental agreements. Depending on whether the solar shopper lives in Washington DC or Maryland, the financial incentives (tax credits/SRECs) usually pay for between 40 – 80% of the system cost. 100% of this upfront solar cost needs to be sourced by the homeowner who usually use a financing vehicle such as an Equity Line of Credit or some sort of Unsecured Loan.
Fannie Mae’s Game-Changer…
As of June 2016, Fannie Mae borrowers have access to a new Energy Loan that allows them to simply add the cost of their solar system to their existing mortgage. Here’s what makes this form of financing a game-changer:
- Super-Low APR: HomeStyle Energy can be used for new projects or to take higher-interest unsecured loans/lines of credit and refinance them or roll them into a potentially lower-cost mortgage. In all likelihood this will result in unprecedented low financing costs for solar energy.
- All Costs Covered: Most financing vehicles have a non-negotiable cap on the loan amount, forcing some Homeowners to come up with a down payment. With this program, lenders can finance up to 15% of the final property value. For example, a typical single-family home located in Annapolis, MD may appraise for $350,000. The available amount for the solar system on this Annapolis home would be $52,500. In most cases, this amount would far exceed the amount of capital needed to complete the project, considering that most solar projects fall in the $24,000 – $34,000 range (before government incentives).
- Peace of Mind: The improvements also have to come with an energy report, whether a Home Energy Score Report or a Home Energy Rating Systems report, and must specify the monthly savings to the borrower. Homeowners can rest assured that their mortgager fully supports the home improvement investment.
Does Every Home Qualify?
At this point in time, only Fannie-Mae homebuyers or refinancers qualify. The program does not extend to new construction or manufactured housing. The following are eligible to apply:
- New homebuyers
- Existing mortgage holders looking to refinance their new solar system
- Existing mortgage holders looking to refinance their existing financed solar system
All applicants have 180 days from close of mortgage note to complete the solar installation. Bear in mind that refinancing homeowners may incur closing/additional fees in the transaction.
Contact your mortgage representative to see if the HomeEnergy Program is right for you.