Remodeling or retrofitting existing homes to become more energy efficient and as close to net zero as feasible, is just as important as building new Zero Energy Homes. In fact, there are ample opportunities to turn standard existing homes into Near Zero Energy, Zero Energy Ready or Zero Energy Homes. By retrofitting the existing inventory of homes, we can move more rapidly towards a carbon-free future. In addition to the environmental benefits and the energy and financial savings, energy upgrades increase the overall value of the home.

Financing these upgrades is often a challenge. In this blog we explore available options for homeowners and contractors financing energy upgrades to existing homes, such as adding insulation, air sealing a home, installing energy efficient windows, adding a high efficiency heating system, or installing solar panels. We put special emphasis on new FHA loans that are available for energy upgrades and renewable energy retrofits in every state of the country.

solar panels

Financing Solar Panels: Leasing vs. Owning

Installing solar panels on a home can be a significant upfront investment, but there are options available that can make solar panels more accessible to more homeowners. Short of purchasing a solar system with cash outright, the three major options are: lease the solar panels, get a solar loan, or take out a home equity loan or line of credit.

Solar Leases and Power Purchase Agreements (PPAs)

With a solar lease, the homeowner does not own the solar system on the home. Rather, they buy electricity from a company that owns and maintains the panels sitting on the roof. Usually the electricity they buy is at an agreed upon lower rate than what they would normally pay the utility. Solar leases allow homeowners to put no money down and are based on 15-20 year contracts, which allows them to buy the system at the end of the lease.

In a solar lease, the homeowner does not benefit from any rebates, incentives or tax credits, they just pay less per month for the lease than what the cost would have been for the energy they use. There are several companies in the U.S. that lease solar panels.

A Power Purchase Agreement (PPA) is a little different in that the homeowner agrees to buy the power generated by the system at a set price per kilowatt-hour. Both options are usually less than what the homeowner would normally pay the utility. The important part is that both options provide for lower utility payments and protect the homeowner against rising electricity costs.

Solar leases or PPAs are a good option for:

  • People who want a solar system without putting any money down.
  • People looking to save money immediately through lower electricity rates.
  • People looking for a simple, quick solution for using renewable energy at home.
  • People whose tax liability is less than the value of available federal and/or state tax credits.

Purchasing Solar Panels with a Loan

Until recently, builders or homeowners only had two options: full cash purchase of solar panels or a solar lease. However, the newer solar loan is a wonderful option for homeowners to finance solar panels for their home. The availability of solar loans is increasing, and there are financial institutions in addition to banks that are providing solar loans. Solar panel manufacturers, credit unions, national lending institutions, such as the Federal Home Administration described below, public-private partnerships, utilities and municipalities are all starting to offer financing for solar panel installation on homes.

The advantages of owning the solar panels on a home include:

  • The homeowner can lower their taxes through available tax credits as well as benefit from other incentives that might be available in their state or region. Under the American Recovery and Reinvestment Act of 2009, homeowners are eligible for a federal personal income tax credit up to 30% of the purchase cost of their renewable energy system, without a maximum limit. This credit currently expires at the end of 2016. State tax credits and incentives are also available.
  • The homeowner owns the solar PV system and that significantly increases their home value.
  • The homeowner or occupant starts saving money right away with decreased energy bills. With the solar PV system, monthly savings on the electric bill are usually greater than the monthly payment on the loan, giving the homeowner a net savings.
  • Solar panels are very low maintenance for the homeowner. While solar leasing companies tout that they maintain the panels in a solar lease, that is rarely a long-term financial benefit, since the panels usually require little or no maintenance.

Home Equity Loan or Line of Credit

A third method of financing energy improvements or solar panels is to take out a home equity loan. Standard home equity loans may work well for homeowners who have substantial equity in their home and good credit. The downside is that the home is used as collateral.

Financing Energy Efficiency Improvements

Just as with financing solar panels, energy efficiency upgrades can be financed through a home improvement loan from a local bank or by taking out a home equity loan. However, financing energy efficiency improvements, as well as solar panel installation, can be done very quickly and efficiently through FHA (Federal Housing Administration) Title I Home Improvement Loans.

FHA Title 1 Home Improvement Loans for Energy Efficiency Improvements and Solar Panels

Perhaps one of the most exciting forms of financing for energy efficiency improvements and/or for solar installation is the Federal Home Administration’s Title 1 Home Improvement Loans program. As part of the U.S. Department of Housing and Urban Development’s (HUD) Property Improvement Loan program, these loans are making it easier for homeowners to retrofit their home to become a Zero Energy or Near Zero Energy Home. The FHA loans are available for various energy efficiency upgrades such as windows, insulation, and HVAC improvements as well as solar electric panels and geothermal energy systems.

How It Works

HUD insures private lenders against loss on property improvement loans they make, allowing lenders to offer very competitive loans for energy improvements. Title 1 energy improvement loans can be used for single-family homes for a maximum loan amount of $25,000. The applicant must have a good credit history and the ability to repay the loan in regular monthly payments.

Both large and small improvements can be financed. Loans under $7,500 can be unsecured (meaning there is no need for collateral.) Interest rates are a fixed rate, based on the most common market rate in the area. Rates are negotiable by lender and the borrower, and may vary between lenders. Homes that apply for a Title 1 Home Improvement Loan must have been built and occupied for at least 90 days.

Admiral’s Bank Admiral’s Alternatives Home Improvement and Renewable Energy Lending

Admiral’s Bank is the largest direct lender of the FHA Title 1 Home Improvement loan and offers a complete line of home energy efficiency and renewable energy loans in every state. Their Energy Performance Solutions loans provide financing for heating, ventilation and cooling, energy efficient windows, solar water heating, insulation improvements, metal roofing and more.


Their renewable energy loans, called Admiral’s Alternatives, help homeowners or builders add solar energy or geothermal systems to existing homes. Through their SolarPlus Loan (up to $15,000, unsecured) and their Solar StepDown Loan (up to $25,000, secured), they give homeowners the ability to borrow up to $40,000 for renewable energy improvements. These loans are also available in all 50 states.

Admiral’s Bank works to make getting an energy loan simple and direct through their three steps:

1.  Get your home evaluated and choose your energy upgrades or improvements.

2.  Get pre-approved – usually within minutes.

3.  Receive your funds for improving your home’s energy performance and usage, possibly as quickly as 12 days.

Admiral’s Bank also offers specific loan programs catered to the renewable energy industry. Solar installers and contractors can offer Admiral’s financing options at no cost to them to help facilitate the installation of solar energy systems for their customers.

Fannie Mae’s Multifamily Financing Option

Fannie Mae announced Green Rewards, a new multifamily financing option that helps owners of apartment buildings and cooperatives invest in energy and water cost saving improvements. Green Rewards provides property owners with both extra loan proceeds and a lower all-in interest rate. For example, a multifamily property seeking to refinance a $10 million loan cold receive an additional $250,000 in loan proceeds to make energy improvements that will reduce its annual $140,000 energy costs. Green Rewards is available nationwide to multifamily building property owners.


Financing renewable energy and energy upgrades for existing homes is now more accessible than ever and now more homeowners can enjoy the benefits of powering their home with renewable energy.

One resource to check out is Green Energy Money, a financial and green project planning and funding resource. Green Energy Money provides financial analysis tools, financing mechanisms, and other resources for making informed decisions on financing renewable energy for your home.

Have you or any of your clients financed energy efficiency measures or solar panels through FHA, other lending sources or solar leases? We’d love to hear from you. Send us an email or leave a comment below.