And now I have anecdotal, personal confirmation that I’m right to be skeptical.
With interest rates at historic lows, we’re looking to refinance our home and lower our monthly mortgage payments. Only trouble is, the housing market in the U.S. has been in a serious funk and home values have plummeted in the past four years. Plus, we had the incredible bad luck of buying our house at the peak of prices in 2005.
20-percent drop in value We paid about 20-percent more for our modest, single-family home in Aurora, Colo. than it would probably sell for right now.
And after seven long years of mortgage payments that now total well in excess of $100,000, and most of which have gone to interest payment, we may, or may not, have enough equity in our home to qualify for refinancing our home.
Enter our 5.59 kW home solar system. We had it installed in June 2010, for an out-of-pocket cost of about $8,000 (yes, we got a great deal, one that still can’t be beat almost two years later). Our PV system covers well over 100% of our home electric use. In fact, we’ve over-produced by 7,000 kWh in the 20 months we’ve had the system.
Gung-ho solar rhetoric wrong? According to the gung-ho-solar rhetoric out there, our solar system should have added significant value to our home. Not so, according to some of the mortgage folks I’m talking to.
And I have a strong tendency to believe these mortgage folks. Basically, the housing market, at least in our very middle-class neighborhood here in Aurora, Colo. is essentially s— right now (I apologize for putting it so crudely; but I do so because it captures my dour feelings on the ways in which the irresponsibility of people who play with money crashed our economy and has negatively affected the lives of average folks like us).
When the housing market where you live is s—, and has been so for many years, as it has been in our neighborhood where we’ve seen one foreclosure after another, the claim that home solar adds significantly to home resale value/appraisal would also appear to be largely s—.
Now, we haven’t had an actual appraisal done yet. It’s possible that, if we do, it could turn out that adding a 5.59 kW solar system that covers 150% of our home electric use (we’re still pre-electric car) might give us enough of a value bump to allow us to meet the minimum 95% loan-to-value ratio required to refinance a home for a conventional loan (it’s 97.5% for an FHA loan, which is also a possibility).
He doesn’t believe in solar Or, it could turn out that the skeptical mortgage loan officer from First Bank (not to be confused with First National Bank) I spoke with recently is right and our personal rooftop electricity factory will do nothing to boost an appraisal of our home high enough for us to meet the 95% loan-to-value threshold to refinance.
I have a strong feeling the First Bank solar value skeptic is right, and the gung-ho solar folks who trumpet the significant home value added claims are wrong on this one.
Of course, I really want the gung-ho solar folks to be right. We’re sitting right on the edge in terms of meeting the minimum loan to value ratio needed to refinance. We’re so close, in fact, that all we’d probably need is a $1,500 home value boost from our 5.59 kW solar system to make the 95% loan-to-value threshold.
The only way we’re going to find out for sure is to plunk $400 down on an appraisal. Trouble is, is that if this appraisal comes in too low we’ll lose the $400. Worse, we’ll be unable to refinance to a significantly lower interest rate. All of this due to events completely beyond our control.
Still, I think we’re going to take the risk and get an appraisal done — and cross our fingers that our solar PV system does in fact end up adding meaningful value to our home.
Stay tuned, as I will definitely let you know if it does, or does not, end up adding such value to our home.