Property assessed clean energy (PACE) financing is revolutionizing the way homeowners finance energy-saving, water-saving and renewable energy upgrades. Administered at a local level, PACE programs make it easier for property owners to invest in their future and reduce their energy consumption, which may even save them money over the long-term.
While the U.S. Department of Energy has issued best practice guidelines for PACE programs, the details often vary from state to state. Program rules can even be different in two cities within the same state.
Still, there are some commonalities among programs. Here are 9 standard facts homeowners should know about qualifying for PACE financing.
1. No Upfront Payments Required
Upfront costs are often one of the biggest barriers between homeowners and efficiency improvements. PACE financing qualification, however, does not hinge on the ability to make a down payment. This is one of the most notable advantages of PACE, and it could help homeowners accomplish efficiency goals more quickly.
2. Eligibility Is Based on Your Home’s Equity
PACE eligibility is based on property equity. PACE assessments are a debt of property and secured by a lien on that property and is not a personal debt. The lien for the assessment may remain with the property even if the current owner, who applied for the PACE financing, sells their home (though mortgage lenders may require payoff of the PACE lien prior to providing their financing). PACE administrators may request a homeowner’s credit report during the application process, but their actual credit score is not the determining factor for eligibility.
3. Applicants Often Qualify for Low Interest Rates
Another advantage of PACE financing is that it may also include low interest rates, which may seem surprising since it does not require a down payment.
The assessment is attached to property taxes and listed as a line item on your annual or semi-annual bill. The amount financed, plus interest and any applicable fees, is paid along with your annual property taxes or via the escrow as part of your monthly mortgage payment. Because property taxes have a higher payment rate than loans, there is less risk for lenders – and a lower risk of default translates into lower interest rates.
4. Four Main Categories of Projects Often Qualify for PACE
PACE details vary from region to region, but most programs fund four different types of projects:
- Renewable energy
- Energy efficiency
- Water conservation
- Natural disaster preparedness (i.e. hurricanes and earthquakes)
A study of PACE programs between 2009 and 2016 showed the breakdown in funding for residential improvements, with 58 percent going toward energy efficiency upgrades and 37 percent toward the installation of renewable energy features. The remaining funding was focused on the other two categories.
5. More Homeowners May Soon Be Able to Qualify
The data shows that 19 states currently have active PACE programs for either commercial or residential properties. At the end of 2017, a total of 32 states, plus Washington, D.C., have passed legislation that enables the establishment of PACE financing – meaning PACE programs could soon be available for 80 percent of the population of the United States. Currently, residential PACE financing is available in California, Missouri, and Florida.
6. You May Qualify for Terms of Up to 20 Years
PACE financing can be extended to the full useful life of the financed improvement. PACE financing allows homeowners to qualify for longer terms and a correspondingly lower annual payment on improvements that have a longer useful lives. They can apply for PACE financing for large projects such as solar panels, which can take 10 years or more to pay back.
7. PACE Projects May Qualify for Tax Credits
Tax credits for efficiency upgrades are still available on both the federal and state levels. Some of the credit offers have expired, and others, such as solar panel tax credits, will be phased out in the coming years (by 2022 in the case of solar panels).
With PACE financing, homeowners can cover the upfront costs of major upgrades like solar panel systems and also take advantage of these remaining tax credits.
8. The Home Must Be in Good Financial Standing
According to recommendations from the Department of Energy for residential PACE programs, homeowners should prove that they are current on all mortgage payments and have not been late more than once with such payments over the past year. The property must also be free from involuntary liens that exceed $1,000.
More importantly, since PACE assessments are paid for via property taxes, the homeowner has to be current on their taxes and they should not have been late with property tax payments at any time in the past three years.
9. Commercial Properties May Qualify for PACE financing
Commercial PACE financing is currently available in more states than residential PACE financing. PACE programs may cover retail properties, agricultural businesses, offices, industrial properties, hotels and hospitality venues, non-profit organizations, and other commercial properties.
The differences in PACE programs across the country, or even within a single state, can be confusing. To help you navigate the application process, it is advisable to find a trustworthy PACE expert.
An expert can make certain that you not only qualify for PACE financing, but that the project will actually bring the kind of savings you expect. Knowledgeable PACE consultants will also be able to recommend contractors who are qualified to complete the project or even suggest other efficiency improvements that can potentially save you money in the long run.
Find out if PACE is available in your area – contact YgreneWorks at (855) 901-3999 or firstname.lastname@example.org today to learn more.