What to Know About Buying a House with Leased Solar Panels

It is a complicated process when an individual wants to buy a house with leased solar panels. Solar panel leases can last anywhere from ten to twenty years. Plus, it can be expensive to buy out of the contract or roll it into a new house purchase with a mortgage service provider.

Solar leases also operate on an escalating payment system, which poses an ongoing liability while under personal ownership. In situations where a solar lease increases one’s debt-to-income ratio, there may be other hurdles to clear when going through the mortgage qualification process. Be sure to review the solar lease contract before signing on the dotted line.

Is it possible that a highly-touted initiative can end up costing a family time, money, and well-being when purchasing a new home?

Possibly. Let’s take a closer look at the issues surrounding the purchase of a home with leased solar panels:

Related: Is Buying A Home Without A Realtor A Good Idea?

How Buying a House with Leased Solar Panels Affects Your Mortgage

Some homebuyers may balk when discovering that taking on a home with leased solar panels means qualifying for additional credit to take on the contract payments for up to 20 years. There is even the possibility that the solar panels become technologically obsolete after paying around $15,000 for the benefit.

Solar panels still generate energy now and in the future. It’s likely technology can create adaptations to account for the lag between technological advances and past purchases. However, the effects on one’s mortgage terms are more important to consider.

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Find Out Who Actually Owns the Solar Panels Before Taking on a Mortgage

There are upsides to purchasing a home with solar energy whether still on lease or purchased outright. The cost and energy savings alone are reasons enough. However, asking a few questions beforehand can help ease anxiety when it comes to taking over the contract.

First, it’s essential to find out whether the seller leased or purchased them. Even if they bought them outright, it’s possible they purchased the solar panels on credit. That makes the seller responsible for paying off the loan and providing proof of ownership before the sale takes place.

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Increased Costs Mean a Bigger Mortgage for Buyers

It’s more challenging to obtain a mortgage loan with leased solar panels as well. Leased solar panels require additional funding that is unnecessary for most home sales. Find out what the lease agreement entails, including the contract term length and associated monthly fees.

A homebuyer may even want to discuss how the added cost of leased solar panels affects his or her overall financial picture, too. It may increase one’s debt-to-income ratio and end up being a disadvantage in other areas of a person’s economic life.

Ready to buy your first home? See how Zumbly can help!

How Solar Panels Affect a Home’s Value

Solar energy has amazing financial benefits since they are more efficient and offer tremendous cost-savings. Plus, it’s clean, green energy that puts power “back into the grid.”

First, buying a home with leased solar panels means that the job is complete. A family can start benefiting from their installation immediately without having to set-up and schedule an installation.
Aside from long-term financial gains on one’s bank account, leased solar panels give a boost to the home’s overall value by $15,000 or more on average due to the immediate savings.
It’s a form of equity that a buyer can’t afford to miss. In fact, it allows the individual to recoup most, if not all, of the original investment in case one decides to take out an equity loan or resell the home later on.
Related: Buying A House Checklist

Know What You Are Getting into Before Going Under Contract

Buying a house with leased solar panels does not disqualify a person from getting a mortgage directly. However, there are a few details to iron out with the bank and financial advisors before agreeing to the purchase.
Transferring the solar panel lease is the major issue to address first. Each manufacturer has different terms, so it’s critical to understand how the process works. Obtain a copy of the lease and review it with an attorney to ensure the details are understood.
It’s likely that the manufacturer requires proof of the pending mortgage before transferring the equipment into the new owner’s name. The prospective buyer must also inform his or her bank that the house comes with leased solar panels. Although rare, the lender may decide not to engage in this type of home purchase transaction.
Buying a home with leased solar panels may be an excellent decision for homebuyers. However, one must determine the best course of action for his or her current and future goals before reaching a final decision.
Ready to buy your first home? See how Zumbly can help!

Consider These Additional Issues Regarding Buying a Home with Leased Solar Panels

If a person is considering purchasing a home with solar panels pre-installed, speaking with the homeowner first is a good idea. He or she should be able to address the following questions:

  1. Are the solar panels leased, owned on a personal loan, or purchased outright?
  2. If they are under contract, what are the terms of the agreement?
  3. Who manufactured the solar panels?
  4. Who installed them?
  5. Did the installers guarantee their craftsmanship?
  6. Can you provide copies of the lease, warranties, and guarantees?
  7. How big is the system?
  8. How much power does the system generate?
  9. What was the difference in your energy bill before and after the installation?
  10. Does your utility service provider offer net metering?

Uncovering the answers to the above-referenced questions is the best way to dig for information regarding the terms and conditions surrounding a home purchase that comes with leased solar panels.
Avoid engaging in any transactions in which the seller seems reluctant to answer anything. He or she may be hiding something that no one wants to take on.

Final Thoughts and Considerations on Buying a House with Leased Solar Panels

The main takeaway from this article that homeowners need to know what they are getting into when purchasing a home with leased solar panels before formally sign anything. It’s still an excellent investment. However, no one wants to encounter any surprises later on after conducting a transaction of this magnitude.
If the homebuyer decides to take over the lease, he or she must be clear on what his or her long-term obligations are and discuss any rebate programs available with the utility company. Doing so can help factor in the real costs of purchasing a home with solar panels.
Ready to buy your first home? See how Zumbly can help!