Green Means Save: How to Slash Bills on a Home Improvement Loan

Considering a remodeling project to boost the value of your property? Weighing various home improvement loan options?

Good, you should be.

Here’s a new one to consider:

Before you drop $40,000 or more on a new kitchen or master bath, familiarize yourself the newcomer on the renovation block: a rooftop solar-power system that not only will lower your overhead costs and insulate you from a volatile energy market - but will likely add just as much to your home value over the long haul.

The technology has come a long way in the past 30 years, reports Businsess 2.0 Magazine. Most importantly, what’s starting to be good for contractors is looking efficient for homeowners, too. For starters, today’s solar systems are far more effective than their commercial predecessors; and most are warranted to last 25 years.

Home improvement loan incentives: Here’s something else to consider concerining these unique types of mortgage loans: the federal government and some states are offering serious incentives that can slash the price of installation (typically over $40,000 gross for a full system) in half.

In the California housing market and New Jersey housing market - the first states to allow so-called net metering, whereby homeowners are credited for electricity they generate beyond their own use - going solar can pay for itself in several years.

Home systems are still rare, so their value is difficult to assess, but home appraisers follow this general rule of thumb: Half the gross cost can be recouped in the home sales price as soon as it is installed. Granted, that’s well below the recovery rates for kitchens and bathrooms (which range from 70 to 90 percent), but your kitchen doesn’t pay the power bills.

Moreover, solar’s ability to lower energy costs also adds value. A study in Appraisal Journal found that for every utility-bill dollar saved annually because of an improvement, you gain $10 to $20 in property value. Therefore, if you can zero out a $1,000 annual electric tab by installing solar, you’ll get back $10,000 to $20,000 in home value.

Whether this holds true for you depends foremost on where you live. California and New Jersey lead the nation in offering financial incentives, but states such as Arizona, Colorado, Nevada and New York are ramping up quickly.

Another determinant is your typical electric bill.

“If it’s under $100 a month, people just put in solar because they want to be part of the solution,” says Mike Hall, VP at Borrego Solar in Berkeley. “When you get to $100 to $150 a month, the financial arguments start to take hold. Anything north of $200 a month is a no-brainer.”