PACE Financing: Property Assessed Clean Energy Program

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So, you are definitely interested in transitioning to clean energy, but you are aware this project is quite expensive, at least if you are planning to go big and do everything right. The good thing is that the Government of the United States prepared some measures that can help you with that and make creating and maintaining clean energy more approachable.

Property Assessed Clean Energy program is one of the options you can go for. It is a program that was introduced in 2010 with an intention to help both commercial and residential buildings upgrade to the solar system or some other environment-friendly option.

What is the PACE program?

Property Assessed Clean Energy program, or in the short PACE program, is a financing package of measures funded by the government that’s available to individuals who would like to invest in clean energy alternatives for their homes or businesses. It is a loan created in a way that covers 100 percent of the project costs, in the form of a lien on the upgraded property.

It is very much alike to the traditional loan given that the applicant is getting money upfront, there is an interest rate, as well as a set repayment period that’s usually somewhere between five and twenty years. That way, business owners and homeowners are in a position to use their fundings to install a solar panel system or to upgrade to more efficient cooling, heating, or lighting options based on renewable energy.

What is a PACE Loan and How Does it Work?

First of all, you should know that you can use the PACE loan for numerous energy-efficient improvements. Installing or upgrading a solar system is just one of them. There is also the possibility of submitting the request for PACE in case you want to do seismic retrofitting for your home or commercial buildings if you are living in earthquake-prone areas, then in case you want to invest in energy-efficient roofing, LED lighting, in the HVAC system, etc.

The important thing is to remember that with PACE, the property you wish to invest in is collateral and that the debt isn’t tied to the owner of that property but to the property itself. Also, unlike traditional loans, PACE lending does not ask for regular monthly payments. You will pay this debt off through regular property taxes after your property was reassessed. In case you fail to pay this obligation, you will face the same penalties predicted for the non-payment of any other property tax bill. Here, the creditworthiness is of no importance regarding acquiring conditions for the loan.

In which states PACE is an option?

The PACE program is overseen by the U.S. Department of Energy, and it comes from a local government agency or a third-party financial entity. To date, there are 36 states, including the district of Columbia, that are offering their inhabitants some kind of PACE program. While most states are proposing only commercial PACE programs, Florida, California, and Missouri also have residential ones.

It is encouraging that the PACE loan market is one of the fastest-growing segments of the U.S. lending industry at this moment, so if you are living in Wyoming, for example, or North Dakota where PACE yet is not an option, there is a huge possibility that your situation is going to change pretty soon.

Advantages of PACE loans

People are very attracted by this loan for several reasons. Here are some of them:

  • Easy to qualify

You won’t have a problem getting this loan. If you compare the conditions and procedures typical for home equity loans that are also used for extensive home improvements, you will see that PACE is much more appealing. You just can’t have any recent issues in your credit reports.

  • Full coverage

You will get 100 percent financing for this project of yours, with no need for a down payment. Thanks to that you will be in a position to start the clean energy upgrade immediately, you won’t have to wait to save some money.

  • The depth goes with the property

Given that the PACE loan is bound to the property, the debt can move from one owner to another, if you decide on selling. So even though you have just finished with the house repairments, you can sell the property and transfer the debt to the buyer.

Disadvantages of PACE loans

There are also some shortcomings of this loan you should know about before applying.

  • Method of payment

We already explained that you would have to pay this debt through your regular taxes, but the truth is, this whole amount of what you own won’t be allocated to equal monthly amounts. The property assessments are something that needs to be paid once or twice per year. So that could be a great burden when the time for payment comes.

  • Interest costs

It is quite obvious that the loan you can get that quickly, and so easily, is followed with significant interest cost. You should bear in mind that these rates are often higher than the ones home equity loans have, so you need to calculate what is your best option given the circumstances and your needs.

Conclusion

Whenever there is money involved, you should double-check every information and second guess your own decisions. The PACE program is definitely something you should seriously consider if you want to invest in a clean energy upgrade, but make sure to know all the terms and details about how to get it and how to stay on course with it. You really don’t want any surprises there. But if you approach this subject vigilantly and with realistic expectations, PACE may be the best thing that ever happened to you.