9 Facts About Qualifying for PACE Financing

window replacement

October 11, 2017

Property assessed clean energy (PACE) financing helps homeowners afford many home improvements. Administered at a local level, PACE programs cover many renewable energy and water-saving features as well as efficiency upgrades and storm protection improvements in areas where PACE has been approved. The U.S. Department of Energy has issued best practice guidelines for PACE programs, but the details of these programs can vary from state to state. Because they are overseen locally, the financing rules may even be different in two cities within the same state. Still, there are some commonalities among programs. Here are nine standard facts homeowners should know about qualifying for PACE financing.

1. No Upfront Payments Required

Upfront costs are one of the biggest barriers to efficiency improvements. PACE financing qualification, however, does not hinge on the ability to make a down payment. This is one of the most notable advantages of PACE, and it could help homeowners accomplish efficiency goals more quickly.

2. Eligibility Is Based on Your Home’s Equity

PACE financing is secured by the property itself, otherwise known as a “debt of property,” not a personal debt. The assessment may remain with the property even if the current owner, who applied for the PACE financing, sells the home or business. PACE administrators may request a homeowner’s credit report during the application process, but approval is not based on a certain credit score.

3. Applicants Often Qualify for Low-Interest Rates

Competitive interest rates are another advantage of PACE financing which may seem surprising since no down payment is required. To secure repayment the PACE assessment is attached to the property and is listed as a line item in the property tax billing. PACE financing is either paid with the annual property taxes or via the escrow account with the property mortgage lender as part of the monthly mortgage payment. Property taxes have a lower default rate than loans, so there is less risk for lenders funding PACE – and a lower risk of default translates into more generous interest rates.

4. Four Main Types of Qualifying Projects

PACE details vary from place to place, but most programs fund four different types of projects:

  • Renewable energy
  • Energy efficiency
  • Water conservation
  • Natural disaster preparedness (including hurricane protection and seismic retrofits)

A study of PACE programs between 2009 and 2016 showed the breakdown in funding for residential improvements, with 58 percent used for energy efficiency upgrades and 37 percent toward the installation of renewable energy features. The remaining funding was focused on the other two categories.

5. More Homeowners May Soon Be Able to Qualify

The data shows that 19 states currently have active PACE programs for either commercial or residential properties. A total of 32 states, plus Washington, D.C., have passed legislation that enables the establishment of PACE financing – meaning PACE programs could soon be available for 80 percent of the population of the United States. Currently, residential PACE financing is available in California, Missouri, and Florida.

6. You May Qualify for Loan Periods of Up to 30 Years

PACE financing allows homeowners to qualify for improvements that have a longer payback period equal to the effective life of the improvement. They can apply for PACE financing for large projects such as solar panels, with terms of 20 years, or improvements to the envelope of your home – upgrading the electrical or installing a green roof – which may qualify for terms as long as 30 years.

7. The Home Must Be in Good Financial Standing

According to DOE recommendations, homeowners should prove that they are current on all mortgage payments and have not been late more than once with such payments over the past year. More importantly, since PACE assessments are paid for via property taxes, the homeowner must be current on their taxes and cannot have been late on payments in the past three years.

8. Commercial Properties May Qualify for PACE financing

As of mid-2017, commercial PACE financing is available in more states than residential PACE financing. Commercial programs may cover retail properties, agricultural businesses, offices, industrial properties, hotels and hospitality venues, non-profit organizations, and other commercial properties.

9. Choosing PACE

The differences in PACE programs across the country, or even within a single state, can be confusing. A trusted PACE provider, such as Ygrene, can determine how much financing you qualify for while helping you navigate the application process. An experienced provider can often recommend contractors who are qualified to complete the project or even suggest other efficiency improvements that may save you money in the long run.

Find out if PACE is available in your area – contact Ygrene at (855) 901 3999 or info@ygreneworks.com today to learn more.