How Solar Panels and Mortgages Can Work Together to Save You Money and the Planet
Renewable energy sources like solar are becoming more and more popular each year and they are now more affordable and accessible than ever before, and solar power is one of the best choices for homeowners who want to reduce their energy bills, reduce their carbon footprint and help the planet by moving over to clean, green, sustainable energy production in the UK.
With mortgage rates continuing to rise with the Bank of England interest rates and with fixed-rate mortgage deals ending, if you have a mortgage your bills will be increasing again, especially if you have a variable rate mortgage. You can save money to pay your higher mortgage costs by reducing your energy bills and you can reduce your energy bills by installing a solar panel system on your roof or in your garden.
But how do solar panels affect your mortgage, and what are the benefits and challenges of installing them on your home? In this article, we will answer these questions and more, so you can make an informed decision about going solar if you have a mortgage.
The Benefits of Solar Panels for Homeowners
Solar Panels are devices that convert sunlight into electricity, which you can use to power your home appliances, lighting, heating and cooling systems. By installing solar panels on your roof or in your garden, you can enjoy the following benefits:
- Cut your electricity bills: Solar panels can generate free power for your home for 25 years or more, saving you money on your energy bills every month. Depending on your solar PV system size, roof location, and your usage patterns, you could save up to £390 per year on average by installing a basic 8 panel solar PV system.
- Reduce your carbon footprint: Solar panels are a clean and green source of energy that do not emit any harmful greenhouse gases or pollutants. The average residential solar PV system in the UK saves between 1.2 and 1.6 tonnes of carbon dioxide from entering the atmosphere each year, which is equivalent to planting about 80 new trees in the UK.
- Receive payments for extra electricity you generate: If you produce more electricity than you need, you can sell it back to the National Grid or to a third-party supplier through the Smart Export Guarantee (SEG) scheme. This way, you can earn extra income from your solar panels and help balance the demand and supply of electricity in the UK.
- Increase your home value: Solar panels can make your home more attractive to potential buyers, as they indicate lower running costs and environmental awareness. According to a study by the website Zillow, homes with solar panels sell for 4.1% more on average than comparable homes without solar. As an example a £300,000 home plus 4.1% could sell for around £312,300, and an average solar PV system costs between £6,000 and £10,000, which is for a high-end system with solar battery storage included, so it pays for itself and that doesn’t even take into account the money you would save on your energy bills.
The Options for Financing Solar Panels
Solar Panels are not cheap to install, but they are a worthwhile investment that pays for itself very quickly. The cost of solar panels depends on various factors, such as the solar PV system size, quality, installation fees, and incentives available. The average cost of a 4kW solar PV system in the UK is between £7,000 – £10,000 (NXTGEN Energy prices start at just £8,500 for a 4kW system and that includes battery storage), but it can vary depending on your location and installer. Our Tip: Always choose a MCS Certified Installer like NXTGEN Energy for your solar PV installation, otherwise you cannot claim the Smart Export Guarantee (SEG) payments, as you are required to have a MCS Certificate to prove your solar PV system is installed correctly and to the high standards as required by MCS certification. NXTGEN Energy is an MCS Certified installer.
Fortunately, there are several options for financing solar panels that can make them more affordable and accessible for homeowners. These include:
- Pay-As-You-Go (PAYG): This is a popular option for homeowners who cannot afford or qualify for traditional financing due to credit issues or limited income. With Pay-As-You-Go (PAYG), you do not pay anything upfront for your solar PV system, but instead you pay a monthly fee to a third-party company that owns and maintains it. You also pay a reduced rate for the electricity you use from the solar PV system. This way, you can enjoy the benefits of solar power without any upfront costs or risks.
- Green mortgages: These are special mortgage products, like Nationwide’s 0% Green Additional Borrowing Mortgage and the Greener Home Reward from Barclays that focus on renewable energy sources like solar power. They may offer incentives such as cash back or a lower interest rate than standard mortgages. Some lenders may also lend you more money if you install solar panels on your home, as they recognise the potential savings and value they bring. However, not all lenders offer green mortgages, so you may need to shop around to find the best green mortgage deal.
- Personal loans: These are loans that you can use for any purpose, including installing solar panels on your home. You can borrow money from a bank, a credit union, or an online lender, and repay it over a fixed period with interest. Personal loans may have lower interest rates than credit cards or other forms of debt, but they may also require a good credit score and income to qualify.
- Flexible finance options: NXTGEN Energy has partnered with Ideal4Finance to offer a range of finance options to our customers. See all our current finance offers on our Solar Panel Financing page.
The Considerations and Challenges of Solar Panels & Mortgages
While Solar Panels offer many benefits for homeowners, they also come with some considerations and challenges that may affect your mortgage terms or your property value. Here are some of the key factors you need to keep in mind:
- Property value: Installing solar panels on your home will normally increase its value, but it may also make it harder to sell or refinance in some rare cases. Some buyers may not like the look of solar panels or may prefer a different type of solar PV system. Some banks or lenders may also be wary of lending money for a home with solar panels, as they may have concerns about the system’s stability, performance, or maintenance over time in very rare cases.
- Home improvements: Installing solar panels may require additional home improvements or modifications that could impact your home’s appraised value and affect your mortgage terms. For example, in rare cases you may need to upgrade your roof structure, wiring, or insulation to accommodate the solar PV system. You may also need to obtain planning permission or comply with building regulations before installing solar panels, depending on your location and property type, for example if the solar panels can be seen from a public highway, you live in a conservation area or if you own a Grade II Listed Building.
- Energy savings: Most lenders will require proof of energy savings from a solar PV system before approving any loans related to it. This means that you will need to provide evidence of how much electricity you generate and use from your solar panels, and how much money you save or earn from them through the SEG scheme. You may also need to have an energy performance certificate (EPC) for your home, which rates its energy efficiency and environmental impact.
Conclusion
Solar Panels are a great way for you to save money on your energy bills that you can then use to offset your mortgage bills, and you are also saving the planet, but they also have implications for your mortgage and your property value. Before installing solar panels on your home, you should do your research and compare different financing options, benefits, and challenges. With the proper preparation and information, you can take advantage of the many opportunities solar panels offer without compromising your mortgage terms or your property value.
Are you considering getting Solar Panels?
If you are a UK homeowner considering installing solar panels, get in touch with us today! The solar energy experts here at NXTGEN Energy will be more than happy to help you on your Solar journey. We are also able to discuss alternative types of green energy products, just in case a solar PV system isn’t suitable for your home! Call us on 01268 928 690 or simply click ‘Learn More’ below to fill out our short form, to get connected to a Solar Energy Expert.
Frequently Asked Questions about Solar Panels and Mortgages
Yes. There is no reason why you can’t remortgage to raise the money to install solar panels either with your existing lender or by finding a better deal elsewhere. You will need to inform your mortgage lender that this is your intention to ensure your new mortgage is compliant with their lending policy terms and conditions.
If the solar panels are fitted to a private residence, this income will be tax free, but businesses and landlords that rent out the accommodation need to be aware that their payment will been seen as taxable income, subject to income tax or corporation tax as appropriate. You can check this with your local HMRC tax office.
If you’re planning to install a solar PV system in your home, you must register it with your Distribution Network Operator (DNO). The DNO is the company responsible for bringing electricity to your home. Here at NXTGEN Energy we can help you with filling out your DNO application to your energy network operator.
No, the 0% VAT rate on solar panel installations will last until April 2027. After that, the VAT on solar panel installations will increase to 5% VAT – meaning it won’t be taxed at the current 20% VAT rate. You won’t need to meet the pre-April 2022 criteria to qualify for the reduced VAT rate either. The 5% VAT rate will apply to solar panels being installed on any residential property in the UK.
Installing an export meter and feeding your excess power back to your supplier would earn you between 6.4p–15p per kWh sent back to the National Grid. British Gas is 6.4p per kWh, Scottish Power is 12p per kWh and Octopus is 15p per kWh.
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