Go on the internet and you will find more articles on stuff like solar energy and wind energy or go on the streets and you will see more electric vehicles on the road. Both of these things can be attributed to the change that society is now wanting to bring to the traditional setup of the way certain things were done. For helping out the environment people are now buying expensive solar panels in a bid to use clean and green energy while also getting to go off the grid. While some can pay for stuff upfront others are taking solar loans for the same. So in this blog, we will learn what happens when you pay off your solar panels and try to figure out if do you get your investment back on solar panels or not.
What Happens When You Pay Off Your Solar Panels?
Buying a solar panel is a huge commitment not just to nature but to yourself as well. A solar panel is pricey. Most people prefer to lease a solar panel or get a solar loan to take care of it. However, some people pay for it upfront. Now since our focus in the blog is on those that take loans to get a solar panel the question that comes to mind is what happens when you pay off your solar panels?
First and foremost the solar panel becoming your property is what happens on paying a solar loan. Next up, you start saving money on electricity bills which is kind of one big reason that you must have considered before getting a solar panel. Depending on the type of loan you take, a solar loan can span anywhere between 5 to 25 years but 8 to 20 years is a more common period.
What are Advantages of Paying Your Solar Panels Early?
- The reason you should consider paying off your solar panels early is to be able to get state and federal tax credits.
- Also, paying up early makes sure that you don’t end up paying more money in the form of interest which would otherwise eat up your pocket handsomely.
- And lastly, a paid-off solar panel can add significant value to your property.
Also See: What is Meant by Solar Loan Calculator?
What are Disadvantages of Paying Your Solar Panels Early?
- If you use solar panels for a short period or plan to get rid of them before you have taken advantage of tax credits available to you then you might make a significant loss.
- Making quick payments might mean paying bigger sums from the start and this can hurt your pocket.
- You might also face a penalty for early pay off which is again not good for your pocket.
- Also, you can miss out on a chance to refinance if you pay off the solar panels too early.
So paying off a solar panel early may have both advantages and disadvantages and so you need to weigh out the options to figure out what is better for you. Now that you have understood what happens when you pay off your solar panels, let’s also see Do you get your investment back on solar panels.
Also Read: Can You Go Solar with Low Credit?
Do You Get Your Investment Back on Solar Panels?
To determine whether or not solar panels are worth it in the monetary sense you need to ask yourself if you will see all the money invested in the setup come your way or if there is some way to recoup your investment. Let’s say a solar panel costs anywhere between 5,000 to 40,000 dollars and so we will consider an average of 20,000 dollars.
Now there are two ways you will be benefitting from the solar panel in the monetary sense. First, you will save money on electricity bills and second, a tax credit awaits you. So if you get a solar panel for 20,000 dollars you would see yourself getting a tax credit of say 5,200 dollars on it based on a 26% provision available. There might also be more other rebates, incentives, etc. in place for you to take benefit of.
Now let’s assume that you go full solar and your home is off the grid. Let’s say the solar panel can power your whole home and so you no longer pay an electricity bill which would otherwise set you back by 100 to 200 dollars a month maybe. So that means a saving of 1,200 to 2,400 dollars a year. So now if we subtract 5,200 dollars from 20,000 dollars then the cost of solar panels comes down to 14,800 dollars. And now we divide it by say 1,200 then the repayment period comes to a total of just over 12 years.
After 12 years you have paid off the solar panel and now own the system. And not to forget that these panels don’t need much maintenance and have a warranty of 10 years or so and a lifespan of 20 to 25 years which means that not only have you gotten your investment back but have also made a profit on the same.
Does Paid Off Solar Increase Home Value?
Earlier in the what happens when you pay off your solar panels section we saw that paying off a solar panel system can significantly increase the value of your home but the question is how much truth is there in it? Well, it seems that it is very true and a solar panel can increase the value of a property significantly.
The U.S. Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab), The National Renewable Energy Laboratory (NREL), and various other institutions have carried out studies to see to what extent solar panels affected the value of a home. In one such research, it was found that the value of a home goes up by 20 dollars for each dollar reduced in the utility bill. So if the solar panel helped save 1,000 dollars a year then the home value would go up by 20,000 dollars.
However, various factors influence the property value of a solar home and some of them are the location of the property, electricity rates, how old the solar panel is, and other such things. But the question of value is does paid off solar increase home value or that does not matter?
The thing is that ownership of the solar panel can affect the way a property deal goes. If you own the solar panel then you can choose to include it in the house sale and make money from it without any issues. But if you have leased a solar panel then it gets a bit complicated. The new owner now has the option to buy out the lease or they can get it transferred. So in a way you being the owner of a solar panel is the only way you can profit from selling a home with solar panels otherwise it does not matter much to the seller but to the buyer of the property. Now you are ready to find out how long until solar pays for itself.
How Long Until Solar Pays for Itself?
We saw the calculation above from which it is safe to say that a solar panel may end up paying for itself in 12 years. Of course, it is factors like the cost of solar panels, electricity bill savings, efficiency of solar panels, and a few other things that might affect the payback period, however, it is safe to assume that an average of 9 to 12 years might be enough for a solar panel to pay for itself. Considering the life of a solar panel might be 25 years you may end up saving enough money to finance a second panel once the first one is no longer in use. Now you know how long until solar pays for itself.
Also Read: How Much Do Solar Panels Save On Electricity Bills?
What Happens to Solar Panels When you Move?
Firstly, it is good to plan a little bit for the future and see if you see yourself shifting or staying put. This can be an important thing to consider before getting a solar panel as the investment is huge. Buying a solar panel and getting rid of it too quickly can mean making heavy losses. It is not necessary you may have to leave your solar panel back with the old home there are a few options to choose from. So let’s see what happens to solar panels when you move.
1. The best thing to do would be to sell the solar panel along with your home. This way you could avoid making a loss on your solar panel purchase while also getting an increased value for your property. However, if you took a secured loan with the home as collateral then you will have to ask the new owner if they wish to continue paying off the loan or find another solution for it. The same can be said for a leased solar panel system.
2. Alternatively, you could take the solar panel with you. Removal and reinstallation can be taken care of by the necessary people. However, there might be additional costs for getting this done while there is a chance of panels getting damaged while removal or transportation. Also, this will void the warranty and that is not something you would want to bring on yourself especially if the panel was bought only recently. After this, let’s find out is it worth paying off solar.
Is it Worth Paying Off Solar Early?
If after going through this blog, you are still wondering is it worth paying off solar early then the answer is- it’s totally your call. Every coin has two sides just as every move has two paths and so it is better to choose which move suits your situation better and to move with it. If you can accept the perks as well as the downside of paying off solar early then just go for it. However, if your solar loan company has an early payment penalty then it’s better to go by the original loan tenure.
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