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Solar Energy
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This got me thinking about something that might seem silly.
What is the payback period for buying a house?
My mortgage will be paid off in a few years, so I currently have a relatively small part of my payment that goes to interest. The rest goes to equity. I have always considered the interest portion of my mortgage as my "rent." As a renter, I only ever pay rent. Rent can increase though. As an owner, I have other expenses like water heaters, new roof, new windows, property tax, paint, and tree trimming among others.
That said, I don't ever even "see" any of my equity unless/until I sell the house.
I am certain that my net worth has increased faster as a mortgage holder than a renter. My buddy never wants to own. He says he always wants to be able to just move. Yet he doesn't move. He did move when he had a partner. She left right after he renewed his lease. His lease is a lot more than my mortgage. He accumulates no equity.
I bought my house about 20 years ago and have refinanced twice. Both times were no-fee opportunities to get lower rates; the last was a much shorter term loan that will be done soon leaving me "rent free."
Since my plans don't include selling, and since it has already been 20 years, that sort of means my payback period is decades not years. Perhaps I was a fool to buy property.
Not.
Building equity is nice, but I feel like locking in (or freezing) the bulk of one's housing costs for several decades is an equal advantage. I've been in my house about 17 years, and it would cost me twice my mortgage payment to rent something roughly approximate, either in a house rental or a smaller square footage apartment with probably 1 or 1/2 less bathrooms that was equally accessible to public transportation. And of course by this time more than half of my mortgage payment is going to equity.1 -
Thank you, I was thinking in£ but used $ because that is where most of you are.
So the reason to suggest the older person, 60, 70 or more dose not buy is that they probably would not see a return on their money in their life times.
I've not really looked at our system for some time, I know its been changed for the worse for companies making the systems and for those who are having them installed for you. much has to be imported. But that's the UK for you.0 -
lynn_glenmont wrote: »MikePfirrman wrote: »So someone with the funds making one total payment is not permitted to do so? Is there a law which prevents full payment? Were the bill $10,000 they are not permitted to pay $10,000 so there would be no interest incurred and the set up would be purchased outright?
Paying in full would be fine for someone that's going to live in the house for a while. It would save them money, perhaps. It depends on their viewpoint. If I had 10K in cash, I'd invest it, but that's me. I tripled my investments in stock over the last year. But if someone had the cash and wasn't 60 or 70 years old and wanted to pay cash, sure.
But most solar systems aren't 10K. Most are 25K to 35K. When a couple that's 60 comes to me and says, why not pay it in cash, I'd tell them to think cautiously. What if they can't live in the house in 10 years. Paying cash makes the point at which you break even much, much longer. Also, many are taking it out of their retirement savings.
If the goal is simply to save money and that can be done in year one, with a 20 year loan, why not borrow it? If interest rates were 7%, that would be one thing, but they are very cheap currently. And if worst case scenario happens and you have to leave the home in 5 years, you haven't paid all of it for the next home owner.
Isn't the loan due when you sell the house? Surely the system conveys like any other attached fixture? You'll still be paying for it for the next owner -- the only difference is that you'll be taking it out of your proceeds at sale.
I would say that would be correct or possibly (but not likely) the institution that has the solar loan would let the new buyer assume the loan. In either case the loan balance is going to be a reduction in the net proceeds from selling the house.0 -
Theoldguy1 wrote: »lynn_glenmont wrote: »MikePfirrman wrote: »So someone with the funds making one total payment is not permitted to do so? Is there a law which prevents full payment? Were the bill $10,000 they are not permitted to pay $10,000 so there would be no interest incurred and the set up would be purchased outright?
Paying in full would be fine for someone that's going to live in the house for a while. It would save them money, perhaps. It depends on their viewpoint. If I had 10K in cash, I'd invest it, but that's me. I tripled my investments in stock over the last year. But if someone had the cash and wasn't 60 or 70 years old and wanted to pay cash, sure.
But most solar systems aren't 10K. Most are 25K to 35K. When a couple that's 60 comes to me and says, why not pay it in cash, I'd tell them to think cautiously. What if they can't live in the house in 10 years. Paying cash makes the point at which you break even much, much longer. Also, many are taking it out of their retirement savings.
If the goal is simply to save money and that can be done in year one, with a 20 year loan, why not borrow it? If interest rates were 7%, that would be one thing, but they are very cheap currently. And if worst case scenario happens and you have to leave the home in 5 years, you haven't paid all of it for the next home owner.
Isn't the loan due when you sell the house? Surely the system conveys like any other attached fixture? You'll still be paying for it for the next owner -- the only difference is that you'll be taking it out of your proceeds at sale.
I would say that would be correct or possibly (but not likely) the institution that has the solar loan would let the new buyer assume the loan. In either case the loan balance is going to be a reduction in the net proceeds from selling the house.
They roll the balance into the new mortgage. The new homeowners have no issues buying it out, because they know some or a lot of it has already been paid off. The old house owner benefits greatly from having a solar system.
There's been many studies on it to confirm. Forbes did one. Every single one says between 3 and 5% net increase in home equity by having a solar system. The only exception is when someone has a solar lease, not a purchase (another reason that I don't like leases).
My company (and most are doing this now) add in a 30 year transferrable warranty that covers installation, roof leaks (related to the solar system), panels and inverters. All work and materials covered with zero deductible, so the new homeowner also gets the warranty.
Research has shown that the older the solar system, the less equity value will increase. Likely because the older systems aren't as efficient. The typical system is guaranteed to lose less than 10% efficiency over 20 years.2 -
Theoldguy1 wrote: »paperpudding wrote: »So someone with the funds making one total payment is not permitted to do so? Is there a law which prevents full payment? Were the bill $10,000 they are not permitted to pay $10,000 so there would be no interest incurred and the set up would be purchased outright?
I know I am in Australia and not US - so things might be different.
But here, sure, you can pay the whole amount upfront here if you want- and if I hypothetically was buying a solar system now and had the money in savings to do that , I would.
Theoretically it would be better to only pay the deposit and pay the rest off over time - since it was an interest free loan and I could then get interest on my savings.
But since interest rates are ridiculously low at the moment, any such savings would be miniscule and IMO not worth the bother - I would just pay it all upfront if I could.
11 years ago when I bought my system, interest rates were higher so that equation would of been different - and anyway I didnt have enough in savings to pay it all upfront even if I wanted to, (most people probably don't) so moot point for me.
There is no such thing as an interest free loan. The present value of the interest is built into the price. Demand a cash discount then compare.
I'm going to hedge my statement a bit before anyone asks. Some retailers (furniture stores are big on this) will offer "interest free financing" and will not discount for cash. In those case when one looks at the fine print one will find that if a payment is missed or the borrower doesn't comply with any terms of the agreement the interest rate goes to 20%+ on the amount of the original loan, even if the borrower is 2 payments from having the thing paid off.
The lender is betting a certain % of the people that take the deal will have an issue and end up having to pay the 20%+ interest. Some people won't end up paying but remember the house doesn't lose.0 -
That may be so for furniture type interest free loans - doesn't mean all interest free loans have same conditions.
We had no issues with ours
Sure, read the fine print and be aware of any pitfalls - as one would do with any large purchase.
But I think for most people, loans for solar systems are the way to go.
Given most people do not have that sort of cash readily upfront.
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paperpudding wrote: »That may be so for furniture type interest free loans - doesn't mean all interest free loans have same conditions.
We had no issues with ours
Sure, read the fine print and be aware of any pitfalls - as one would do with any large purchase.
But I think for most people, loans for solar systems are the way to go.
Given most people do not have that sort of cash readily upfront.
My point is there ain't no such thing as an interest free loan from a business. There is either an interest rate stated or it's buried in the cost of the product.1 -
Theoldguy1 wrote: »paperpudding wrote: »That may be so for furniture type interest free loans - doesn't mean all interest free loans have same conditions.
We had no issues with ours
Sure, read the fine print and be aware of any pitfalls - as one would do with any large purchase.
But I think for most people, loans for solar systems are the way to go.
Given most people do not have that sort of cash readily upfront.
My point is there ain't no such thing as an interest free loan from a business. There is either an interest rate stated or it's buried in the cost of the product.
well, obviously.
I dont think anyone disputes that.
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paperpudding wrote: »Theoldguy1 wrote: »paperpudding wrote: »That may be so for furniture type interest free loans - doesn't mean all interest free loans have same conditions.
We had no issues with ours
Sure, read the fine print and be aware of any pitfalls - as one would do with any large purchase.
But I think for most people, loans for solar systems are the way to go.
Given most people do not have that sort of cash readily upfront.
My point is there ain't no such thing as an interest free loan from a business. There is either an interest rate stated or it's buried in the cost of the product.
well, obviously.
I dont think anyone disputes that.
You are disputing it.
You said you have an interest free loan. There is not such thing as I said above. Either the interest rate is stated or the interest is buried in the price of the product.
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No, I said it was an interest free loan and did not have same conditions like early pay out fees, interest added at the end etc like your furniture examples.
I do not dispute that the cost was built into the price.3 -
Theoldguy1 wrote: »paperpudding wrote: »That may be so for furniture type interest free loans - doesn't mean all interest free loans have same conditions.
We had no issues with ours
Sure, read the fine print and be aware of any pitfalls - as one would do with any large purchase.
But I think for most people, loans for solar systems are the way to go.
Given most people do not have that sort of cash readily upfront.
My point is there ain't no such thing as an interest free loan from a business. There is either an interest rate stated or it's buried in the cost of the product.
Most of the loans I set up have it clearly spelled out with total payments. What you'll pay over 20 years, interest (and things like dealer fees, which are significant) included. Most of the solar purchases I've sold have been between 20K and 35K. I would say most would have saved around 5K to 7K by paying cash instead.
I don't pay taxes until the end of the year for the same reason. I'd rather have the cash myself to stay more liquid and to invest. Most financially savvy people would. Paying cash, if you're over 50, makes little sense to me, unless you're very confident that you'll be around in 20 years, living in the house. With the state of health in the US, that's rare that someone can definitively feel that way. Ultimately, I leave it up to them, but I've had many consumers come to me with the idea of paying cash and when they see the numbers, they quickly change their minds.
To them, it's more about paying less each month sooner. And most of the time, I can offer that from day one on a 20 year loan. I'm actually the only one that I know that has done a 12 year loan. Personally, I wanted to be done with the payment much sooner but I'm currently not saving money on a monthly basis. I'm about breaking even, maybe paying 20 more a month (for now). With utilities going up 4% per year, I'll break even likely next year (aside from my increase in equity, which is significant).1 -
I just heard another example of why you never want to "lease" a solar system. I'm trying to help someone out that needs a new concrete tile roof. The solar contractor that put the solar system on their roof didn't properly inspect the roof. Now, around 8 years later, it needs replaced. First of all, that should have never happened. Second, the solar contractor is the only one that's allowed to take the solar panels off to reroof, because if anyone else does it, it negates the solar lease warranty.
The solar company (I'm familiar with them, they are good but also the most expensive in Tucson) wants $7000 to remove and reinstall the solar system, which is a total ripoff. Average cost to do that should be in the $2000 to $3000 range tops. And if a concrete roof is properly maintained, they can last 40 to 50 years.
Never get a solar "lease".3 -
I have a solar system in my cottage. Ours is self contained and we installed it ourselves 30 years ago when we built the place, so can't comment on subsidies and selling back to the power companies, we have never been connected to the grid. I do enjoy being off grid and never getting a hydro bill.
But we only use it in the summer, where we are I wonder about the feasibility of being off grid in the winter. Hydro here in the city is pretty cheap (like $100/month for our 2500 sq foot primary residence) so it wouldn't be worth it to me to make a huge 20 year investment in a solar system. 1 -
I'm about to take the next step (with prompting from this thread ) and talk to a few solar companies this week to see what they say. There are a couple that seem to have a lot of happy local customers, and there's a 10% discount with one if we go through Costco. We would definitely finance it, no way we could pay up front, and the 26% tax credit would make a big difference to us next year.
One of the things that's been holding me back from even looking into this is the aggressive door-to-door marketing these companies do. Every couple of weeks someone's at my door wanting to talk to me about my power bill (in a way that initially leads one to believe they're from PG&E unless you ask directly), incredulous that I wouldn't be interested in putting in a solar system because all my neighbors are installing them or they're "not selling anything, just want to talk" (ha!).
The one time I actually talked to one of these people it ended with me saying politely "not interested" and them incredulous I didn't want to save X money a year by signing up on the spot, and made me feel a little stupid (I know that's on me).
I guess it's kind of dumb not to do my own research just because I'm annoyed with how the companies market the product, and I have to say my husband is really happy I'm ready to move forward with this.3 -
MikePfirrman wrote: »I just heard another example of why you never want to "lease" a solar system. I'm trying to help someone out that needs a new concrete tile roof. The solar contractor that put the solar system on their roof didn't properly inspect the roof. Now, around 8 years later, it needs replaced. First of all, that should have never happened. Second, the solar contractor is the only one that's allowed to take the solar panels off to reroof, because if anyone else does it, it negates the solar lease warranty.
The solar company (I'm familiar with them, they are good but also the most expensive in Tucson) wants $7000 to remove and reinstall the solar system, which is a total ripoff. Average cost to do that should be in the $2000 to $3000 range tops. And if a concrete roof is properly maintained, they can last 40 to 50 years.
Never get a solar "lease".
You're saying the warranty on a solar system is different if it is acquired by a lease or a purchase? I've never heard of a produce warranty that is different based on the acquisition method of the item in question.
I mean if I get a car the standard manufacturer's warranty is the same if I lease it, get a loan or pay cash for it.0 -
Theoldguy1 wrote: »MikePfirrman wrote: »I just heard another example of why you never want to "lease" a solar system. I'm trying to help someone out that needs a new concrete tile roof. The solar contractor that put the solar system on their roof didn't properly inspect the roof. Now, around 8 years later, it needs replaced. First of all, that should have never happened. Second, the solar contractor is the only one that's allowed to take the solar panels off to reroof, because if anyone else does it, it negates the solar lease warranty.
The solar company (I'm familiar with them, they are good but also the most expensive in Tucson) wants $7000 to remove and reinstall the solar system, which is a total ripoff. Average cost to do that should be in the $2000 to $3000 range tops. And if a concrete roof is properly maintained, they can last 40 to 50 years.
Never get a solar "lease".
You're saying the warranty on a solar system is different if it is acquired by a lease or a purchase? I've never heard of a produce warranty that is different based on the acquisition method of the item in question.
I mean if I get a car the standard manufacturer's warranty is the same if I lease it, get a loan or pay cash for it.
I'm trying to help her out (for free) just to get a better understanding. Seems she signed a lease agreement (not a purchase) with a very high end system manufacturer (not Telsa, but similar to Tesla). Because it was a "premium" system, only certain contractors can touch it or it voids the warranty (which is pretty damn ridiculous to begin with because that's supposed to be the only advantage of a lease -- no maintenance). So, she got the lease like 8 years ago, had them install it. Now, her roof, she's told, is bad. My guess would be whoever installed it didn't really properly evaluate the roof for repairs at that time (something you need to fix before it gets solar). She has a concrete roof. So it also might be they let some shingles that were missing go too long (certainly could be part her fault) -- concrete roofs should last 40 to 50 years if properly maintained.
Anyway, this manufacturer is now saying only one company in town can touch it (the issue with "premium" systems -- I would never buy a premium system with limited installers -- leads to situations just like this). The only company in town allowed to touch it is totally ripping her off with taking it off before getting her new roof. What should cost around $2000 to $3000 is costing her 7K.
This is why it's so critical to read contracts and know what you're getting into. 80% of people that get solar are happy. At least in the last few years. The other 20% signed bad contracts or got ripped off.2 -
I'm in NY & my system is 6yrs old so remember things have changed. It's one of the best financial decisions I've ever made. Shop around before making a decision. The company should tell you if trees are going to be a problem. They should tell you your break even point & rate of return. In my case it's paid most of my electric bill - which includes central air. My break even point is 9 years. My ROE 9.5%. Where else am I going to get 9.5% safely? The only thing I pay to PSEG are delivery charges that come to about $12 a month. We paid cash & didn't need a loan. I've heard lease arrangements aren't very good.Choose wisely - there are some fly-by-night companies out there. I think the system should increase the value of your home. Wouldn't you pay more to avoid an electric bill? Also, from an environmental point of view, cutting down trees would be really stupid. Hope this helps but it's just my opinion and experience.2
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Thanks! We have a 2 story house (hence the astronomical energy bills) with a south-facing backyard. The roof is perfectly open, with no chance of any trees ever obstructing the sun, so that's a plus.1
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If you also need a new roof, GAF (the roofing shingle company) is building solar into shingle roofs. GAF is the largest shingle company in North America. Similar concept to Tesla, just they are roofers, so you have roofers making a solar system that fully integrates into your roof. From a leak or concern about your roof perspective, it's a great option if you have shingles. Plus, GAF will never go out of business. For now, it's a bit expensive, but nothing like Tesla. May not look quite as good, but it's low profile and looks like a skylight. Also, they are making it in the US soon. This more applies to areas where there are shingle roofs, not so much in my area with all concrete tiles.
I kept my home in Ohio and rent it out. When that house needs a new roof, I'll likely integrate solar into it from GAF. We'll see. There's more cost in Ohio for heating (gas) than A/C. Also, sunshine is an issue there. Around half of what you have here in AZ.0 -
Access to sun is a real plus here. I live in the CA east bay area, we have sun all the time except during the rainy season or when forest fire smoke is really thick. Also, because of the milder winters, we use far, far less energy in the winter when there is less sunlight.3
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I remembered this thread while reading the following article. I think solar is a fabulous idea, but apparently implementation still leads a lot to be desired:
https://time.com/6317339/rooftop-solar-power-failure/
Rooftop Solar Power Has a Dark Side
This year, during the heat of summer, when temperatures in New York surpassed 90°F, the 22 solar panels on the roof of my house were doing absolutely nothing.
This is not something I learned until September, four months after my husband and I bought this house with a purportedly functional leased solar system in upstate New York, months after logging into a website that inaccurately told us that the panels were working, months after we forked over $6,000 to prepay the remainder of the 20-year lease to the company supposed to be maintaining the solar panels, Spruce Power, which happens to be the largest privately held owner and operator of residential solar in America.
A third-party technician dispatched to our house by Spruce in September blamed squirrels that chewed on some important wires. Spruce blamed the previous owners, who they said fell behind on lease payments; in September, Spruce told us it had disconnected the system previously but that did not explain why they’d taken our money to prepay the lease on the panels in June. The panels are still not working to full capacity. (Made aware that this article was in the works, Spruce said in September that it will repay us for the months the panels were not working.)
We are not alone. Obscured by the recent rush to sign up households for rooftop solar and speed up the electrification of America are those who already have solar panels on their roof that do not work.
(article continues)1 -
Air conditions are not really a thing here, eventhough it might get 30C in my flat in summer. The best way to control temperature in summer is to ventilate in the morning as long as the air is still cooler outside than inside, then close the curtains. Yeah, sun shades on the outside of windows are much better, but living in a rental I can't change anything on the structure of the building.
In winter I try to preserve energy as much as possible while still living in a warm flat. My bedroom is currently still unheated. If it gets too cool I use an electric matres topper for a bit. Uses hardly any energy and I get into a warm bed.
I think it works. With regards to electricity (everything including warm water, but without heating) I use about 60kwh per month. I'd love to put a small solar panel on the roof around my flat, but fixing it would again be something structural. Would not expect to create a lot of electricity (that would be used in my flat only at the moment of creating it) but still an interesting toy to play with.1 -
Since we're talking about home temp control I thought it would be interesting (and helpful to me) to see what people have to say about solar vs traditional heating/cooling. We live in an area where we use more cooling in the summer and less heating in the winter, and there's an aggressive campaign by various solar companies going on right now to get everyone on board with solar.
My husband wants me to seriously consider it, but I'm skeptical - some of the claims seem overly optimistic. My concerns are mainly
1. The system is expensive, so even if the reduction in heating/cooling bills is as advertised we would be adding a monthly payment until it's paid off (with the addition of interest on the loan).
2. PG&E is bankrupt and desperate, and has already announced they will start charging for putting excess power back into the grid. I'm a little concerned that they would eventually find a way to tax solar users for not using their service. PG&E is privately owned so I'm not sure what the law is regarding their ability to do this.
3. We plan to sell the house in 10-15 years, and my understanding is that the solar panels don't necessarily add value to the house, and we would end up on the negative side of thousands of dollars in the end.
Does anyone have any thoughts or experience?
The overall idea of solar is great. Unfortunately, many of the companies that sell them can be problematic. Not all companies, but many.
SELLING
The biggest issue many people have with solar through a company is when they go to sell their home. Solar doesn't add a lot of value to resell. In some cases, it works against you. For example, if you have not completely resolved the solar panel cost by the time you sell, many buyers will make you pay off the panels remaining cost out of the house selling price. In that case, it can COST you money. If you are doing a loan or a pay on time for the panels, it can impact your house sell.
P&G
P&G shouldn't charge you for excess solar. They are supposed to credit you. But it seems in Cali, they figured out a way to underpay you for the excess solar energy. I attached an article on how it works.
WEATHER
If you live in a windy, dusty, heavy snow, or live under a lot of trees, panels may need to be cleaned yearly or they may get damaged. If they get damaged or very dusty--will the company cover that while the loan is outstanding?
SOLAR isn't a bad idea. The issue is not all companies play fair. If you dabble in solar, dabble carefully.
OFFGRID
If you live in Cali--which I suspect--it may be legal for you to go completely off the grid. If you can produce enough solar to power all your needs and set up a storage system, you may be able to disconnect for P&G. In most parts of Cali, it is legal to go off grid. Check your local laws though.
So solar can be good, but you have to be careful of how you do it and with whom.
Proceed with caution.
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