Solar Home Financing: Alternative to Second Mortgages

Homeowners in Berkeley, Calif., may soon have access to low-cost financing for energy efficient home upgrades. A proposed city program would allow Berkeley homeowners to pay for the installation of solar panels and solar hot water heaters through their property tax bill.

Leonardo DiCaprio, Cameron Diaz, and Alec Baldwin are just a few of the big Hollywood names who've been spreading the word about living an eco-friendly lifestyle. It seems that the message is being heard-and one city government is doing its part by proposing a program to help homeowners pay for the installation of solar-powered energy systems.

The price of being eco-friendly

It's not easy being green. But if you live in Berkeley, Calif., it might not be that hard either. Berkeley's city council is working on a program to help homeowners pay for the installation of renewable energy systems such as solar panels and solar-powered hot water heaters. The goal is to facilitate a massive decrease in the city's usage of non-renewable energy sources.

The upfront costs associated with solar installation in a home are estimated to be $15,000 to $30,000. Today, most homeowners who want to go green have to come up with a lot of green by financing these costs through a second mortgage or refinance mortgage. Homeowners lacking sufficient home equity would have to go with even more expensive forms of financing.

Creative financing

As proposed, the Berkeley program would provide funds upfront to homeowners for approved upgrades installed by approved contractors. Homeowners would then repay those funds through an annual assessment that appears on their property tax bills. The assessment would act as a lien, giving the financing banks some protection if the property owner defaults. While homeowners would pay interest on the funds, city officials want to keep the rates competitive, somewhere below 7.5 percent. The goal is to offer homeowners some savings over what they'd pay for a second mortgage or other type of financing. In doing so, the city hopes it will encourage homeowners to bite the bullet and make the solar upgrades.

Homeowners who take advantage of the program would benefit immediately from lower electricity bills and a probable increase in property value. The increased property taxes used to pay for the installation are tax deductible as well, so homeowners would get an additional benefit. If the home is sold before the system is paid for, the assessment is transferred to the new property owner.

Berkeley officials are touting the solar financing program as a win/win, offering benefits to homeowners, green contractors, and the environment, too. Some believe that the program may have a ripple effect, serving as a model for other cities and creating more jobs in the renewable energy industry.

Protecting natural resources and saving the environment aren't just Hollywood causes. Big movie stars see the sun as a warm solution to our heating needs. Hopefully someday soon, there'll be more programs like Berkeley's to help regular folks make a difference, too.