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Buying a House with Solar Panels: Is It a Good Idea?

Kristina Hubbard, CMA,  Branch Manager / Sr. Mortgage Advisor

July 11, 2022 — 8 min read

Before buying a house with solar panels, brush up on long-term costs, solar panel maintenance requirements, and the long-term impact of solar panels on home value. In this piece, we'll also review the advantages and disadvantages of owning solar panels, potential complications when buying a house with solar panels, and the difference between leasing solar panels versus purchasing solar panels.

Buying a House with Solar Panels

If you're going to buy a house with solar panels, make sure you know details about the equipment, including:

  • If the homeowner decided to purchase the solar panels
  • Whether they used financing to buy the panels
  • Whether there's a lien on the equipment
  • Warranties

Leased Solar Panels vs. Purchased Solar Panels

For properties with leased solar panels, the panels are omitted from the home assessment. If a homeowner decides to purchase solar panels, the equipment is included in the home valuation. However, in some cases, comparable properties dictate that solar panels don't provide appreciable value, so they won't raise the value. Regardless, some homeowners will still be attracted to solar energy. In terms of your mortgage, it may or may not have an appreciable effect.

Does the Homeowner Own the Panels?

It's simple if the homeowner paid cash--that means when you purchase the home, you assume full ownership. While the previous homeowner could take the panels with them, they would have to state that in the buyer's agreement.

The solar company may put a lien on the house if the previous homeowner purchased the solar panels with a loan. Most lenders won't finance a home with an existing lien, so to move forward, the company must agree to lift the lien until after the purchase, and then restore it.

If the previous homeowner leased the panels, they will have to transfer the lease into your name. For the majority of transactions, this isn't an issue.

What's the Impact of Solar Panels on Home Value?

Installing solar panels may or may not impact home value; it all depends on different factors stemming from the house and comparable properties nearby, including if the previous homeowner purchased or leased their solar panels, and how that impacts the home assessment.

Fannie Mae & FHA Guidelines on Solar Panels

For solar panels installed on the roof of a home, it's mandatory to meet Fannie Mae's standard eligibility requirements. If the equipment is financed, its value isn't included in the value of the home when it's appraised. There are additional requirements to obtain a mortgage through Fannie Mae on a home with leased solar panels, including:

  • Lease payments must be integrated into the potential buyer's DTI.
  • The panel owners (the solar leasing company) must have third-party insurance to cover damage if a malfunction or a faulty installation occurs.
Father holding solar panel in front of daughter while explaining how to perform solar panel maintenance.

Other Considerations

There are other factors to consider if you're buying a house with solar panels, including if there's an equipment warranty.

The home must also have a second energy source. Most lenders restrict homes from relying only on solar power since a decrease in sunlight could leave the home uninhabitable. Finally, how would solar panel payments fit into your debt-to-income ratio (DTI)? If it's a large payment, it could lead to a higher rate or the denial of a mortgage.

Solar Panel Maintenance

Solar panels are built to last, especially if they're installed on a graded roof, as rain will wash away most of the debris.

In general, it's a good idea to perform solar panel maintenance two to four times annually. Depending on where you live and the size of your system, it shouldn't take more than a couple of hours. If you decide to perform the work yourself, you won't need specialized tools--just a hose, a leaf blower, a bucket with dish soap and water, a soft-bristle brush, and a ladder and safety gear, if needed.

Homeowners should judge their ability to perform solar panel maintenance safely. Some panels may be too high to reach or are set in a steep or slippery location. In that case, homeowners should hire a professional.

If you decide to perform maintenance yourself, shut the solar panels off beforehand. Solar panels are electrical equipment and should not be cleaned while active.

Not all solar panels will have the same maintenance suggestions, so check with the manufacturer. If you live in a snowy climate, you may need to perform more extensive maintenance during the winter, as inches of snow may impact your panels' ability to absorb sunlight.

Pro Tip: When using water to clear snow, take care that it's lukewarm, not hot. Solar panels are made of tempered glass, and extreme temperature disparities can cause them to crack. Use a long-handled squeegee to wipe away detritus and excess water.

Solar Power Advantages and Disadvantages

Solar power is environmentally-friendly, but there are pros and cons to weigh if you're considering buying a home with solar panels. Here are four solar power advantages and disadvantages to think about if you're considering panels.

Advantages of Solar Energy

Reduced electricity bills. Over years, it's possible to save thousands of dollars if you purchase or lease solar panels, depending on where you live, the size of your solar system, and how much electricity you use annually. In some areas, it's possible to sell surplus solar energy if you generate more than you can use; however, all states have the infrastructure to support this.

Solar Renewable Energy Credits (SRECs) allow homeowners to earn money in return for solar-powered energy generation. These are sold separately from the physical electricity that your solar panels produce. They're valuable because many utility companies must buy a certain number to meet annual sustainability requirements.

Reduced carbon footprint. While producing and distributing solar equipment does have an environmental impact, the energy produced is clean, pollutant-free, and emits no greenhouse gases.

Each year, did you know the average U.S. home produces close to 15,000 pounds of carbon dioxide? With solar panels at home, you can reduce your carbon footprint by over 3,000 pounds annually, according to experts.

Tax benefits. If you purchase solar panels, federal and state benefits are available, depending on where you live and when the solar panels were installed. In December 2020, Congress passed an extension of the Solar Investment Tax Credit (ITC), which provides a 26% tax credit for systems installed in 2020-2022, and 22% for systems installed in 2023. Click here to learn more.

Low maintenance. Generally, solar equipment requires little maintenance. There is little wear and tear, and rain will wash away dirt and debris that might block the solar panels from absorbing sunlight. So, after covering the initial cost of the equipment, you won't have to spend a lot on solar panel maintenance and repairs. The inverter is the major only part that you may need to replace, as it continuously converts solar energy into electricity and heat.

Leased solar panels installed on roof and producing energy.

Disadvantages of Solar Energy

High initial cost. Up-front costs for solar panels and equipment can be high, so, it's important to know how long you want to live in this space. You won't recoup the cost of buying a home with solar panels if you're going to move or live in an area that is dark for extended periods.

Uses a lot of space. Solar panels don't work for every type of roof or with every type of material, including those used in older homes, like slate or cedar tiles. If your home doesn't qualify, you may want to explore ground-mounted solar options. Ground-mounted installations cost more than rooftop installations but could maximize your energy production, depending on the orientation and roof shading.

Solar storage costs a lot. Solar energy should be used immediately or stored in batteries. Those batteries can be charged during the day and used at night. This is a good setup if you don't have access to a grid and want to use solar energy all day. In most cases, it makes more sense to use solar energy during the day and take energy from the grid at night.

Manufacturing process. There are environmental impacts associated with solar energy, including water use, habitat loss, and the use of hazardous materials in the manufacturing process. Some panels contain cadmium and lead, which are toxic metals.

The U.S. requires manufacturers to recycle these substances. However, the majority of photovoltaics are produced in countries where hazardous materials are sometimes disposed of improperly. Photovoltaics are solar cells that convert sunlight into electricity. When they're disposed of improperly, it leads to air, water, and soil pollution.

So, Should You Buy a House with Solar Panels?

Solar energy is clean and abundant, but it's still evolving. If you have high utilities and would benefit from potential savings, buying a house with solar panels may be a good option. For those concerned about costs, remember you can lease solar panels for a lower up-front cost. If you choose to lease solar panels instead of purchasing solar panels, or if you choose to buy a home with leased solar panels, the impact on home value is less and you may not qualify for tax incentives.

Contact your local Mortgage Advisor to explore home loan options and learn more about the impact of solar panels on home value.

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