PACE (Property Assessed Clean Energy) financing allows property owners to borrow money for renewable energy and energy efficiency upgrades, with repayment obligations attached to the property’s tax bill rather than the individual. This senior lien structure prioritizes repayment and enables long-term financing up to 20 to 30 years.
Mechanics and Benefits
PACE loans are repaid through property tax assessments, allowing interest rates from 4% to 8% and terms extending beyond traditional mortgages. Homeowners can finance 100% of solar installation costs, typically $20,000 to $30,000 for residential systems, without personal credit qualification. The obligation transfers to new property owners if the home is sold before repayment completion.
Considerations
PACE creates a senior lien that takes priority over mortgage claims, potentially affecting refinancing or home equity lines of credit. Lenders may require PACE disclosure before mortgage approval. Property owners must ensure the solar system produces sufficient energy savings to cover annual PACE payments. Some states have implemented stricter consumer protections following criticism of aggressive marketing practices.