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How to use your home loan or a monthly subscription service to fund your solar power solution

How to use your home loan or a monthly subscription service to fund your solar power solution
Neesa Moodley
By Neesa Moodley
20 Aug 2023
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At a Money Cents webinar, Daily Maverick looked at funding your solar solution (panels, inverter and batteries) via a loan from your bank or a rental subscription service.

The imports of solar panels have soared beyond all expectations, as people seek to avoid rolling blackouts and increasing electricity costs.

Senior economist Gaylor Montmasson-Clair of Trade and Industrial Policy Strategies reported that the country had imported R3.6-billion worth of solar panels in the first quarter of 2023 and another R8.4-billion in the second quarter, showing that demand had ramped up exponentially. 

At a Money Cents webinar, Daily Maverick looked at how to finance your solar power solution (panels, inverter and batteries) via a loan from your bank or a rental subscription service. 

https://www.youtube.com/watch?v=O0x_Pan6xhI

Kival Singh, head of sustainability at FNB, says if you are going to finance your solution via the bank, you have two main options: secured lending or unsecured lending. 

Under the National Credit Act, the maximum interest rate you can be charged on an unsecured loan (personal loans and credit cards) is 29.25% while the maximum interest rate you can be charged on a secured loan (typically via your home loan) is 20.25%.  

“If you have an investment or share portfolio with your bank, you can also use that as collateral to fund a loan for your solar solution,” Singh says. This option would be classified as a securities-based loan, which means the interest rate would be lower than a personal loan.  However, if you default on repayments, the lender or bank would be within their rights to recover the monies due, from the investment or share portfolio you have put up as collateral. 

Financing your solar solution via your home loan


There are several ways to finance your solar solution via your home loan. For example, you can make use of available funds that you already have in an access bond — these are typically funds that you have prepaid into your home loan.  

“You could apply for a re-advance on your existing home loan, and that usually comes at no additional cost. For example, let’s say you bought a house five years ago, you would have paid down some of the capital by now. 

“You can then re-advance a loan up to the original bond amount in order to access some of those funds for your solar solution,” Singh explains. He says the third option is to take a further loan within your home loan. 

For example, if you have recently taken out a home loan, and have not yet made enough monthly payments to have built up capital that you can access, you could register a higher bond at the deeds office. However, Singh warns that you will incur additional costs such as bond registration costs, so this is not the best way to finance your solar solution. According to the calculator on the Better Bond website, an additional bond of R350,000 would generate total bond registration costs of R15,733. 

“You also need to take into account that the longer the term over which you finance the solution, the higher the costs will be. Solar panels typically have a lifespan of around 25 years, while batteries and inverters last between five to 10 years,” Singh says. Warranties on batteries and inverters typically match those periods. 

“Looking at the home loan option, it would make sense to structure your solar finance so that you have paid it back within six to seven years. Over the following three years, and even before that, you should channel any savings you are seeing on your electricity bill towards your home loan, so that when you are ready to buy new batteries and a new inverter, you have funds readily available,” Singh advises. 

Financing your solar via a subscription service


If you are loath to take on debt and prefer a short-term or temporary solution, there are service providers who offer you the option to rent a solar solution over periods ranging from three months to as long as 36 months.

Andrew Middleton, the co-founder and chief executive of GoSolr, a national solar subscription service provider, says when you buy a solar solution, you are likely to incur high upfront costs, including installation.

“Our subscription service is available with free installation and although we have different contract terms ranging from three months to 36 months, you can cancel the contract with one month’s notice,” he says. This makes it an ideal solution if you are uncertain about the permanence of your accommodation or not sure what solar solution you want to commit to just yet.

GoSolr’s monthly subscription rates start at R1,399 for a “small household” with an electricity bill of less than R1,500 a month, to R1,740 for households pending between R1,500 and R3,000 a month, to R2,900 for households spending more than R3,000 on electricity each month.

“One of the benefits of subscription versus ownership is that you can upscale your chosen solution as and when you need to. I generally advise clients to start small and then upgrade, as that is simpler and easier than going for a big, expensive solution and then trying to downgrade,” Middleton says.

R4,400 a month is the highest monthly subscription service, aimed at households spending more than R5,000 a month on electricity, and a once-off set-up fee of R4,400 secures your installation, certificate of compliance and municipal registration. If you choose to add on two extra solar panels, that will cost you an additional R230 a month and an extra battery will cost you another R690 a month. 

Insurance is your responsibility


Regardless of whether you choose to buy your solar solution via the bank, or opt for a rental subscription service, insuring the installation is your responsibility. 

“A solar installation is typically a fixture, so that would fall under homeowners’ insurance. In the same way that you have to insure a car while you are paying it off or renting it, you also need to insure your solar installation,” Middleton says.

Singh adds that putting in a solar solution is likely to add to the value of your home, which means you need to update the insured value of your home. DM

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