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How Solar Panels Affect Getting a Mortgage?

By August 26, 2019Uncategorized
How Solar Panels Affect Getting a Mortgage?

The installations of residential solar panels are increasing dramatically up by 50 percent annually since 2012. One of the best ways to reduce your environmental footprint and your energy bills is through the installation of best solar panels in the UK.

Why not? Not only do homeowners gain the monthly energy savings, but they also might be entitled to sizeable tax credits. For homeowners who own rooftop power systems, a solar panel does add to home value.

Unbeknownst to many property owners, the method you use to pay for those cheap solar panels for sale can have severe implications if you wish to sell or refinance though. Such implications could disrupt your whole deal, mainly if the solar panels are leased.

A lot of would-be buyers get surprised by the terms of a solar system lease because numerous real estate agents lack the capacity to explain them appropriately. Mortgage underwriters – the people responsible for getting your mortgage application approved – can similarly be wary of leased solar panels.

That results in increased documentation burden and – at times – denied mortgage applications. It’s essential to understand the pros and cons of installing solar systems, however more importantly, how you pay for solar systems and how that affects your mortgage application.

Solar Acquisition Types and Their Effect On Your Mortgage Application

Many solar companies in the UK currently offer homeowners three methods of getting solar power.

In case you own solar equipment, you can absolutely expect further documentation for underwriting irrespective of how they were acquired. Be prepared for it. Mortgage underwriters have to determine the effect on your DTI ratio and any title or lien implications prior to approving your mortgage application.

The three types of solar acquisition are:

  • Solar Equipment Purchase – If the owner of a home bought the solar equipment, he or she may or may not own a debt related to the solar equipment.

In case the property owner bought the solar equipment outright without any funding, then they should be good-to-go. No debt-to-income hit and no issues other than submitting a little additional documentation to show full free and clear possession.

If the solar equipment was bought with an installment loan or second mortgage, the debt must be incorporated in the DTI if the debt is being paid off.

  • Solar Equipment Lease – If the property owner leases their solar equipment, the lease payment of solar equipment must be included in debt-to-income. Leased solar systems are considered as personal property rather than part of a property. However, that doesn’t mean there are no title implications.
  • Hybrid – If the property owner enters into a contract to make use of energy generated by a solar company who has installed solar equipment on the property, and they are only charged on a monthly basis for the usage of solar energy in place of a utility bill to the utility company, then no month to month debt is needed to be included in the DTI.

Real estate and mortgage issues apart, solar systems do save a lot of money for many homeowners. At times it’s negligible, and sometimes it’s important – it depends on where you live. Just be aware of the possible mortgage implications that come with those solar systems.

Russell White

Author Russell White

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