Choosing a way to pay for solar panels

What are the main ways to pay for solar panels?

• Cash. No interest and the simplest paperwork, but it uses savings that could earn a return elsewhere.
• Home equity line of credit or mortgage refinance. Usually lower rates than unsecured loans, but secured against your home and tied to your mortgage terms.
• Installer or bank loan. Convenient and fast. Rates and fees vary, and some installer loans bury a fee in the price, so compare with the same system at a cash price.
• Government or municipal programmes. Some loans, grants and property-tax-based repayment programmes have existed, but they open and close, so check what is available now.
• Lease or power purchase agreement. You pay for the system or its output over time and do not own it. See solar lease versus PPA in Canada.

The longer overview is in solar financing options in Canada, and a side-by-side comparison goes further.

What does a loan actually cost? A worked example

The figures here are placeholders to show the arithmetic, not offers. Suppose a system costs 12,000 dollars and you borrow all of it over 10 years.

• At 0% interest, the payment is 100 dollars a month and you repay 12,000 dollars.
• At 7% interest, the payment is about 139 dollars a month and you repay roughly 16,700 dollars, so interest adds around 4,700 dollars.

If the system saves you 90 dollars a month, the 0% loan is cash-positive from month one, while the 7% loan costs you around 50 dollars a month until electricity prices or your savings rise. Replace the figures with your own quote, your lender's terms and your utility's export rules. Solar panel payback period shows how to bring savings into the sum.

Which government or municipal programmes exist?

Over recent years, Canada has had federal loan and grant programmes for home energy upgrades, provincial and utility rebates, and municipal financing that is repaid through the property tax bill. Terms, funding and eligibility have changed often, and some programmes have closed to new applicants. Do not rely on a summary written months ago. Check the Government of Canada energy-efficiency pages, your provincial energy ministry, your municipality and your electricity utility for what is open today, and read your documents carefully on eligibility rules such as using a registered installer or applying before starting work.

See the Canada solar incentives guide and the Canada Greener Homes Grant explained for background, and ask each installer which programmes it can work with.

What should you compare across financing offers?

• Total cost of borrowing. Interest plus fees over the full term, not the monthly payment alone.
• Rate type. Fixed or variable, and what happens at renewal.
• Security. Whether the lender takes a claim on your home or on the equipment.
• Prepayment. Whether you can repay early without a penalty.
• Effect on a sale. Whether a lease, loan or tax-bill charge must be paid off or transferred when you sell; see selling a house with solar panels.
• Tax treatment. Interest and any income from exports may be treated in specific ways, covered in the solar paperwork and tax checklist.

Ask for the same equipment on a cash quote, so you can see what financing adds to the price.

How does financing apply to community energy projects?

Larger projects use their own mix of public funding, utility money and private capital. The Drake Landing Solar Community in Okotoks, Alberta, was a demonstration led by Natural Resources Canada through CanmetENERGY, working with local partners including the Town of Okotoks, and its about page and publications give the background. A single household has fewer options, which is why comparing the five paths above, with real numbers, is the best protection against a bad deal.

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