Everything you need to know about PACE financing
If you’re new to PACE financing, you probably have questions. Here at Ygrene, we have answers. Below you’ll find information to help you fully understand the definition of PACE, how it works, the program’s history and how to discover if your home or business qualifies for this smart alternative to traditional financing.
What is PACE Financing?
PACE, which stands for property assessed clean energy, is a new concept in financing home and commercial property improvements. Named one of the top 20 “world-changing” ideas by Scientific American magazine, PACE financing is an easy and effective way to finance a range of upgrades that save energy, conserve water, harness renewable energy, and protect against natural disasters such as hurricanes and earthquakes. Administered at a local level, PACE financing makes it easier for property owners like yourself to invest in your future, increase comfort and security, reduce your energy usage and, ultimately, it may help you save money over the long-term.
How Does PACE Financing Work?
With PACE, property owners can get 100% financing based on available equity in their property and ability to pay, among other factors. The amount financed, plus interest and any applicable fees, is then added to your property taxes and paid over time – on your annual or semi-annual property tax bill, or via escrow as part of your monthly mortgage payment. PACE financing is secured with a continuing lien on your property.
What is the History of PACE Financing?
PACE financing began a decade ago when a group of Berkeley, Calif. homeowners petitioned to have their utility lines placed underground. The city would pay the upfront cost (from a bond) and the homeowners who benefitted would repay the cost through their property taxes over a given number of years. Stakeholders thought the same concept could be applied to energy efficiency and renewable upgrades, and the model for PACE was created.
In 2008, Gov. Arnold Schwarzenegger signed legislation that authorized this special type of property assessed financing, and the concept become a reality. Today, PACE-enabling legislation exists in 33 states, plus Washington D.C. Of those, commercial PACE is active in 20 states, and residential PACE is offered in three: California, Florida, and Missouri. Throughout the nation, PACE programs have created more than 42,800 jobs and enabled nearly 176,200 upgrades to residential and commercial properties as of early 2018, according to PACENation.
While PACE programs are enabled by state legislation and approved by local governments, PACE financing is not a government program.
How Do I Qualify for PACE Financing?
Eligibility is based primarily on the available equity you have in your property and your ability to pay, among other factors. No minimum FICO score is required. For example, homeowners and commercial property owners must have at least 10 percent equity stake in their property, must be up-to-date on mortgage payments and taxes, and cannot be in bankruptcy (some jurisdictions require being clear of bankruptcy for a certain number of years).
Why Choose PACE Financing?
A competitive alternative to credit-based financing, PACE offers no money down financing for eligible home improvements that can help lower your utility bills, improve your comfort and indoor air quality, and increase your property value. The cost of improvements can be spread out up to 30 years in some states, and your first annual payment may be deferred for up to one year or longer (subject to underwriting guidelines, approvals and date of financing).
If you decide to sell your home or commercial property, the PACE assessment or special tax may be transferred to the new owner. However, while property taxes are legally transferrable when you sell or refinance your property, most mortgage lenders require a full payoff of the PACE balance at the time of sale. Therefore, if you are thinking about selling or refinancing in the near future, check with your lender first.
What Improvements are Eligible for PACE Financing?
Hundreds of home and commercial improvements qualify for PACE financing. Among the more common are solar photovoltaic (PV) systems, roofing, HVAC systems, impact-resistant windows and doors, drought-tolerant landscaping and many more. View a list of eligible improvements in Florida, California or Missouri, and find out if PACE is available in your area.