So you’re looking to become energy independent? You want to eliminate your electric bill and reduce your carbon footprint by investing in renewable energy. To achieve this, you want to add solar panels to your property. Residential solar is becoming more and more attractive with the available federal tax credit and rising electricity costs. However, there is a question you should be asking yourself. How does installing solar affect the value of your property? And do solar panels increase home value or do solar panels increase property value?
A recent Zillow research study found that properties with solar panels sell for 4.1% more on average than comparable homes without solar. Do solar panels increase home value? So there you have it, question answered, case closed, end of discussion. Well, not exactly; yes, if you install solar panels, your property value will increase, and energy-efficient features are important to 80% of home buyers. Another question should be, how does adding solar affect my ability to sell my home in the future?
If you decide to sell your home after installing solar, there’s no need to worry; your home will instantly be more desirable to home buyers. The biggest question that presents itself is “how you financed your solar?”
The first option is paying cash. However, not everyone has enough money in their savings to write a check for a solar PV system. With the rapidly rising property values in Maricopa County, you have several options. If you have enough equity in your home, many go the route of a cash-out refinance of your property. Using your home’s equity to pay cash for your new system. When performing a cash-out refinance, you typically will need an appraisal. You should be able to provide your solar PV system plans to the appraiser so that they can include the system upgrade in your home’s value, taking advantage of the system’s future value. Another option is by securing a home equity loan or line of credit. In this case, a 2nd lien is placed on the property, using it as collateral for the loan. In this case, the solar system loan will be paid off with the equity of the sale at the closing of your property. Finally, if the solar system is financed using an “unsecured loan” (not tied to the property), it is considered “personal property.” In this case, the solar PV system cannot be included in the home’s market value. At the end of the sale, you are still responsible for the loan. Ideally, there is enough equity in the property that you can pay it off with the proceeds of the sale as in the other options.
When looking at financing options, it is essential to understand the loan terms and conditions. You will also traditionally find a much better interest rate for any secured financing like a cash-out refinance or home equity loan, compared to non-secured financing like a personal loan or credit card.
Installing solar panels in your home is a sound judgement. Whether you are planning to hold onto your property or upgrading it for sale in the future, investing in solar panels is a wise decision. If you are still contemplating ‘do solar panels increase home value’ read ”solar’s effect on real estate market”.