Yes, I know I used the word “Virginia” twice in this article’s title. Of course, I’m riffing off the old phrase about Santa Claus. You know, how some people don’t believe in him.
Coming out of the Christmas season, I hope your holidays were joyous whether you believe in Santa or not.
And just like that little girl named Virginia who didn’t believe in Santa Claus, some people in the state of Virginia don’t believe that you can get solar panels for zero down in the Old Dominion. Because our state doesn’t have the same solar incentives and financing options that homeowners in states like California or New York enjoy, some Virginians think the only way to get solar panels on your roof in our state is to spend thousands of dollars up front.
In fact, most people who want to go solar in Virginia say that having to make a large investment up front is the main thing that’s stopping them from going solar now.
Well, if that’s your situation, then I’ve got very good news for you. Not only can you get solar for no money down in Virginia and start saving money on your electricity bills right away. You may also find that, as an investment, solar gives better returns than many conventional investments.
And unlike those investments, which can go up and down in value, the value of solar is relatively stable and the returns from solar are predictable.
Leasing vs Owning Solar Panels
For years, homeowners in other states have been able to get solar for no money down in two ways that are not widely available in the Old Dominion. First, they can lease solar panels from a solar company. Second, they can buy electricity from the panels through a power purchase agreement (PPA).
In both cases, the solar company installs the panels on your roof or in your yard, but the company maintains ownership of the panels. That means you don’t own the solar system on your roof — you just host the equipment at your home and use the power that the solar system produces.
While each of these is an easy way to get solar at home, compared to owning your own panels, both leasing and PPAs have their drawbacks.
Mainly, the homeowner doesn’t get as much financial benefit from either leasing panels or buying power as from owning their own solar panels. Also, when it comes time to sell your home, both a solar equipment lease and a PPA put a lien on the property that some home buyers may not be comfortable with. That can make it harder to sell your house.
By contrast, if you’ve purchased the solar panels on your roof, your home may be more appealing to buyers and may earn a higher resale value.
So, it may be just as well that purchasing solar panels is the main way that homeowners get solar in Virginia. Owning panels can give you double the benefit of getting solar from a lease or a PPA. But if only there weren’t the problem of that pesky upfront payment to make the purchase…
Zero Down Solar in Virginia with a HELOC
Enter the home equity line of credit, or HELOC.
For homeowners with good credit, a HELOC can finance the entire cost of a home solar system without the need to pay any money up front. That means you don’t have to pay for the whole cost of the system or even make a down payment in order to get solar.
Assuming that you buy an average size 5-kilowatt home solar system, here’s a sample scenario from Solar Power Rocks showing how a Virginia homeowner could use a HELOC to get solar at no money down:
- You’ll finance the entire purchase price of $18,750, the average cost for a 5-kilowatt system in Virginia, with a 15-year loan. That means you don’t have to pay any money to get started.
- You’ll save an average of $749 on electricity in the first year, but your loan payments will be $1,779, for a difference of $1,050, or about $88 per month. So far, you’ve taken down the cost, but you’re still in the red.
- You get into the black once you apply the main incentive for solar available in Virginia, the 30% Federal Tax Credit, which was renewed at the end of 2015. Because you’ve purchased the system, even using a loan, you’ll get back $5,625 on your taxes. When you subtract the payments on your loan from the proceeds of the tax credit, you’ll be left with an extra $4,595 in cash at the end of the first year.
- After 15 years, when you pay off your loan, you’ll see over $1,250 per year in savings until the end of your system’s life.
(Please note: this sample scenario for an average home solar installation across the state of Virginia may not represent actual results with Main Street Solar or any particular installer. We’re happy to give you a customized quote for your situation.)
“For our 25-year estimate, you’ll see pretty nice returns, to the tune of $8,101 after all the payments,” says Solar Power Rocks. “That’s a huge amount of money for a zero-down investment!”
Returns Comparable to the Stock Market but Safer
With the scenario above, your investment in solar will give you a 6.8% internal rate of return each year. That certainly compares well with putting your money in the stock market, where the S&P 500 has returned an average of 7.0% annually over the last 25 years.
Solar’s return is about the same as the stock market. But solar panels are a much more reliable investment than stocks.
With the stock market, past performance is no guarantee of future returns, and your yield on the stock market could be lower in the years to come. Meanwhile, with solar panels, you know you’ll use them for electricity for 25 years or more, and utility rates are unlikely to go down. If anything, the electric company is likely to raise your rate in the future.
In terms of safety and predictable returns, solar is more like cash investments such as a certificate of deposit (CD). But at 2% for a 5-year CD these days, solar gives a much better yield than CDs do — more than three times better in fact.
How You Can Get an Even Higher Return
As they say, your mileage could vary. And because the numbers in this scenario are relatively conservative, you could do even better if your situation is different.
For example, with a shorter term on your loan, you could get a lower interest rate. Even with recent increases, interest rates remain at longtime lows. As of today, Virginia homeowners with good credit can qualify for a HELOC at an interest rate of 3% or below.
Also, your solar system could cost less and last longer. For example, we install many 5-kilowatt systems for around $15,000. And while the panels are under warranty for 25 years, tests have shown that they’ll continue to produce power at a high rate for 30 years or more.
Finally, if electricity rates go up at your utility, you could save more money per month. In that case, you’ll be saving even more money with solar, which could raise your rate of return to 7% or higher.
Waiting to Get Solar Gives You a Return of 0%
The good news is that you don’t need any money up front, even in Virginia, to start saving money by going solar and earning nearly a 7% return on your investment.
The bad news is that the longer you wait, the more money you’ll be wasting on utility power. That’s just like leaving your investment capital in your sock drawer.
And the return on money in your sock drawer is 0% annually, guaranteed. Actually, considering inflation, the sock drawer’s return is negative.
If you have money to invest, you don’t need me to tell you that leaving it in your sock drawer is not a solid investment plan. But even if you don’t have any ready cash, don’t let that stop you from getting solar this year.
Since we specialize in Virginia, we’ve had the chance over the years to help homeowners from Blacksburg to Lynchburg to Harrisonburg get solar with no money down in Virginia.
Can we help you? Just contact us for a free site assessment and solar quote to find out.