How Much Equity Does Solar Add to Your Property
By: Eric Huesca, SEO Content Writer
October 25, 2022
You should probably find out how adding a solar power system to your home would influence the debt to equity. Does installing a solar energy system add value to your home?
So, what is home equity? The value of your home, less any loans or mortgages secured against it, is known as your home’s equity. In essence, it refers to the area of your land that you can rightfully call “your own.” To determine it, take the difference between the value an appraiser has placed on your home and the amount you still owe on your mortgage.
Property in a urban neighborhood
Your equity may grow over time if the value of your house continues to rise. The increase in return on equity may result from a house improvement or simply the result of owning a home in an appreciating real estate market.
For instance, if you enhance the value of your property by $95,000 after borrowing $50,000 against the equity in your home to cover the expense of home solar installations and you are successful in doing so, then you have successfully grown your investment by $55,000.
Some of the factors that will increase the equity of your home include;
Solar Installations
Do you want to lower your debt to equity of your home? Solar installation is the best option. Improvements that save energy will lower your monthly utility expenses for as long as you own the property. These changes will also offer additional appeal to purchasers when the time comes to sell the property. Many buyers are attracted to energy-efficient features because they will allow them to cut their expenditures as homeowners.
Upgrading Home Fixtures
As per equity theory, relatively superficial modifications might have a greater impression on buyers than extensive upgrades. Given the inexpensive expense of this improvement, many real estate professionals praise the transformative power of a fresh coat of paint.
According to some experts, a fresh coat of paint can improve the return on equity of your property by up to 5 percent. Other modest improvements, such as replacing old light fixtures and the front door, can also increase the value of your home.
Enhancing Curb Appeal
New plants and a layer of fresh mulch are just two examples of low-cost landscaping touches that may greatly improve your home’s curb appeal.
Some of these adjustments can even be made on your own time and without spending much money. The visual impression will affect both purchasers and appraisers. Some of these improvements are important in reducing the equity multiplier on your home.
Location
Your existing home could be in the perfect location for you, adjacent to your employment or your parents’ residence, but appraisers consider three main factors when determining American equity to assign depending on the location of the house;
- Quality of the local schools
- Job opportunities
Entertainment and recreational facilities
Equity in Solar
Although a significant initial investment is required to power your home with solar energy, investing in solar panels may be worthwhile due to their many advantages. In addition to lowering your carbon footprint and saving money on long-term energy expenses, installing solar panels can also increase the return on equity of a home. The solar panel installation makes your house more appealing to potential buyers in the future.
The Lawrence Berkeley National Laboratory of the United States Department of Energy conducted the most extensive study of solar homes between 2002 and 2013 in eight states. The study’s goal was to determine how much the installation of solar panels influences home buyers and American equity of your home. It was determined that purchasers in six states were willing to spend an additional $15,000 for homes with solar panels compared to properties of equivalent size and value that did not have solar panels.
Additional research has shown that the decrease in your monthly power bill and the growth in your long-term energy savings are significantly linked to the boost in the value of your home. The National Renewable Energy Laboratory (NREL) provided information from a study recently published in The Appraisal Journal. The Appraisal Journal is an academic publication authored quarterly by the Appraisal Institute, the most prominent professional association for real estate appraisers in the United States.
According to the findings of this study from 2008, the American equity of a home increases by $20 for every $1 that is saved on annual utility expenses. A solar energy system that helps a homeowner save $500 annually can add a value of $10,000 to their property hence reducing the home equity multiplier.
Given this increased worth, sellers and real estate brokers can raise the price they are asking for a home. Both buyers and sellers stand to gain from the higher resale value of purchasing an energy-efficient home.
How Much Equity Do You Get?
Do you want to reduce your home equity multiplier through solar panel installation? The amount of solar panel installation varies depending on different factors such as;
Region of Your Country
The amount of equity added to your property as a result of installing solar panels will vary depending on where in the United States you live. In most cases, the value of a home will rise more rapidly in a region that receives more sunlight than one that receives more cloud cover.
Electricity Cost
The worth of your solar panels will be determined partly by the cost of power in your area. If the cost of electricity is high where you live, the value of your solar panels will increase since they will allow you to reduce the amount you pay each month for electricity.
Solar Installation Cost
According to equity theory, costs associated with the solar installation will affect the value of your solar panels. Because of the high installation cost in your region, solar panels will not add as much value to your property as they would if they were more affordable.
System Replacement Value
The system replacement value will affect your solar panels’ value. If your solar panels are getting on in years and need to be updated, the value they add to your home will be lower than it would be if they were brand new.
Community Environmental Conscious
The value of your solar panels will be affected by the environmental consciousness in the community in which you reside. Because solar panels are considered to be an ecologically friendly technology, the value of your property will increase if you happen to live in a region where people are environmentally sensitive.
Age of the Solar System
The age of your solar system might impact equity in your home due to decreased efficiency and power production with increased system age.
Amount of Energy Generation
The quantity of energy that your system generates will have an impact on the amount of equity that you have in your home. This is because if your system creates more power, you can utilize less electricity from the grid, resulting in a reduced monthly electric bill.
Use Your Equity for a Higher Equity
Homeowners with sufficient equity may qualify for lower interest rates when applying for a mortgage loan. The term “equity” is used to describe the value of the house that you own. A mortgage of $200,000 against a home’s value of $250,000 leaves you with $50,000 in equity.
Typically, you can borrow up to 80% of your home’s worth (after deducting your current mortgage balance). According to the given scenario, a maximum loan of $80,000 would be available. Home equity loans are a fantastic way to acquire money because their interest rates are typically lower than those offered by credit cards and personal loans.
If you can obtain higher equity, it would be highly significant in financing some of your house bills, such as;
- Solar panel payments
- Curb appeal improvements
- House interior improvements
- Kitchen Remodel
All these house improvements can increase your home equity, which would offer you more returns if you decide to sell the home.
There are various ways you can use to access home equity, including;
Cash-out Refinance
A cash-out refinance permits you to withdraw equity by obtaining a new mortgage with a larger loan amount. You exchange your current mortgage for a larger one and pocket the difference. As with any refinance, your new mortgage will pay off your old one, leaving you with a single monthly payment. Refinancing typically takes between 30 and 45 days.
Home Equity Loan
What is a home equity loan? This is a second mortgage which is a secured debt owed to lenders in addition to the initial mortgage used to purchase the home. A home equity loan is a loan in which the borrower receives money all at once from the lender. After getting a loan, you’ll have to start paying it back immediately, and the interest won’t change.
Home Equity Lines of Credit
The HELOC operates much like a credit card. During the initial draw period, which can last for as long as ten years, you can withdraw as much as you like up to the credit limit. Your HELOC credit line will continue to “revolve” as you pay the principal. This greatly enhances the ability to access funds on an as-needed basis.
Conclusion
Do you want to reduce debt to equity on your home? Solar panel installation can be the best choice you can make for your home. For more details on solar panel installation and what is equity on your home, contact Solgen Power.
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Solgen Power is a solar energy contractor that sells and installs solar for homeowners. Solgen Power has been recognized by INC. 5000 as one of the fastest growing companies in the nation. Solgen Power has grown nationwide and continues to provide excellent customer service to homeowners.
