It’s that time of year when many people dive into home improvements. Of all the home improvement projects that you could undertake, which one offers the best payback?
On average, for every $10 spent on home renovations, about $6 to $7 can be recouped in added value after selling the home, depending on the project. It’s important to reflect on the fact that money spent on most major home improvements can’t be recouped until the home is sold. That’s if the property maintains value, as real estate is volatile and unpredictable these days.
However, there’s at least one home improvement that can guarantee payback for every dollar spent on it. The best part is that it pays for itself whether or not the property is sold, and it can return it’s value three or four times over the course of its lifetime.
Solar panels afford the best payback for your home improvement dollar, even if you take out a loan to finance them.
The average cost of solar panel installation
The average cost of a solar installation nationwide can range from $9,620 for a smaller 4kw system to $20,350 or more for a larger 10kw system, according to SolarReviews.com.
For reference to other home improvements, a typical bathroom remodel costs about $10,800, while a kitchen remodel costs about $22,000. Pretty close, right? But one problem is bathroom and kitchen remodels are considered personal expenses and don’t qualify for tax credits or incentives.
Conversely, installing solar panels is considered a domestic energy production investment. All residential and commercial solar projects installed during 2021 will qualify for a 26 percent federal tax credit against the cost. Additionally, many local communities offer solar incentives. Even utilities have gotten into the action with solar performance programs and other credits.
Taking out a solar loan
Solar loans offer homeowners a path to invest in solar energy. This subcategory of home improvement loans come in a wide range of payment options and terms that can vary. For example, we currently offer a variety of 10, 12, 15, 20 and 25-year loans that start as low as 0.99 percent.
With a solar loan, consumers are still able to cash in on all of the federal and local solar incentives for which they qualify. The incentives can be built into the loan structure, reducing the monthly payment amount from the beginning. For example, the cost of a $10,000 solar system would be reduced to $7,400 once the 26 percent federal tax credit is applied within the first year. That’s taken into account when setting up the repayment structure, along other rebates and credits that might be available.
Net Metering accelerates solar loan payback
Most residential solar systems qualify to participate in “net metering” programs. Net metering is a process by which extra electricity produced by your solar power system is sent into the utility grid. In exchange, you receive credits towards future energy use on your energy bill. Later at a time the panels aren’t generating as much power as the property consumes, the credits pay for the electricity pulled from the grid.
With solar panels directly powering the home and paying for electricity from the grid through net metering credits, solar customers don’t have to worry much about their utility expenses. Credits are built throughout the summer and then used throughout the winter when there are fewer hours of sunlight.
Payback up to 400% of initial cost over a lifetime
Instead of having a regular power bill, the much more predictable solar loan payment becomes the utility bill. The same amount will be due every month until the loan is paid in full. Through the generation of power for your property, solar panels typically pay for themselves within 8 to 13 years, depending on the size of the system.
Additionally, solar power systems often have warranties that last up to 25 years. Their full productive lifespan can be as long as 30 to 40 years. As a result, these solar systems can easily pay back up to 300 or 400 percent of the initial cost of installation.
If the homeowner chooses to move, solar panels boost the home’s resale value, too. But once solar is installed, it could be worthwhile to stay.
All Energy Solar can help determine if your property is a good fit for solar, estimate how quickly you could achieve payback, and help you apply for all qualifying incentive programs. Get your free, no obligation virtual site evaluation!
Download our eBook, A Realtor's Guide for Solar, to get a snapshot of all of the necessary information you or your realtor should know before listing your home with solar.