A new program from Fannie Mae known as HomeStyle Energy Mortgage will allow homeowners to buy solar panels and make other energy efficient upgrades for less than 4% interest according to Washington Post Real Estate columnist Kenneth R. Harney. Borrowers will also be able to access a 30% federal investment tax credit for purchasing solar panels.
Currently most companies only let you lease solar panels, but by purchasing the panels homeowners can add equity to a home, save on utility bills, and and avoid the hassles and potential buyer objections to taking over payments on leased panels when selling a home.
Owners can borrow no more than 15 percent of the as-completed appraised value of the home for energy upgrades. The portion of the loan amount designated for these improvements must be placed into an escrow account overseen by the lender. Appraisers must also determine the as-completed, enhanced valuation of the property to be expected after the improvements and verify that they were indeed completed. For upgrades costing more than $3,500 in total, an energy efficiency analysis is required, such as a HERS (Home Energy Rating Systems) report.
HomeStyle Energy loans can also be used to pay off existing energy-related debts, such as credit card balances, home equity credit lines and PACE (Property Assessed Clean Energy) liens, which are popular in some parts of the country and are tied to local property tax assessments.
Fannie Mae's big competitor Freddie Mac also offers energy-financing options, but with a few differences: there is no cap on the percentage of as-completed appraised value that can go for energy improvements. There is no mandatory residential home energy report. And Freddie’s maximum debt-to-income limit for borrowers is 45 percent, vs. Fannie’s 38 percent.