How to Get Out of a Solar Loan

A solar loan finances the purchase of a solar panel system for a property. Homeowners typically use these agreements to acquire solar energy benefits without a substantial upfront investment. Over time, circumstances may change, leading property owners to explore options for altering or concluding their solar loan obligations. This article guides navigating the pathways available for managing such financial commitments.

Understanding Your Solar Loan Terms

Before considering any actions related to a solar loan, review the original loan agreement and associated documentation. These documents contain specific clauses that dictate the terms under which the loan was issued and outline provisions for early payoff, transferability, or other modifications. Locating the initial contract and any amendments is the first step in understanding your options.

The loan agreement details any early payoff clauses, which specify conditions for satisfying the loan balance before its scheduled maturity date. These clauses may include prepayment penalties, which are fees charged by the lender for early termination. Identifying these potential charges in advance is important for financial planning.

Another important aspect to examine is the transferability provision. This clause clarifies whether the solar loan can be assumed by a new property owner if the home is sold. Understanding these conditions, including requirements for lender approval or credit checks for a prospective transferee, is essential for future planning. The agreement also provides lender or servicer contact information, including account numbers, necessary for future communications.

Accessing the current loan balance and amortization schedule is a key preparatory step. This information is obtained directly from the loan servicer through their online portal, by phone, or via a written request. Many solar loans are secured by the solar equipment or the property through a Uniform Commercial Code (UCC) filing. You can verify such a filing through public record searches or by reviewing your initial loan documents.

Paying Off Your Solar Loan

Satisfying a solar loan ahead of its scheduled term involves a precise process to ensure the account is properly closed and any associated liens are released. The first step is to formally request a payoff quote from your loan servicer. This quote provides the exact amount required to satisfy the loan on a specific date, accounting for the principal balance, accrued interest, and any applicable early payoff penalties as outlined in your original loan agreement.

A payoff quote includes a “good-through” date, the specific date by which payment must be received to be valid. These dates commonly range from 10 to 30 days from the quote’s issuance, requiring prompt action. Understanding the quote’s components, including any per diem interest that accrues daily, helps ensure the correct amount is remitted. The quote also specifies acceptable payment methods, such as wire transfers for immediate processing, certified checks, or online payment portals.

Upon successful remittance, obtain written confirmation from the loan servicer that the loan balance is zero. This confirms your obligation has been fulfilled. If the solar loan was secured by a UCC filing, the lender is obligated to file a UCC termination statement once the loan is paid in full. This termination formally releases the lender’s interest in the solar equipment and removes the lien from public record, a necessary step to clear the property’s title.

Transferring or Refinancing Your Solar Loan

Altering a solar loan can involve transferring the existing obligation to another party or securing new financing to pay off the current loan. When considering a loan transfer, the original loan agreement dictates whether this option is permissible. If the terms allow for assumption, contact the original lender to understand their requirements for a new borrower.

The new party, such as a home buyer, needs to undergo a credit check and application process for lender approval. If approved, a formal assumption agreement is executed, legally transferring responsibility for loan payments and liability to the new borrower. This releases the original homeowner from their financial obligation.

Refinancing the solar loan involves obtaining a new loan to pay off the existing one. This new financing can come from various sources, such as a new solar loan from a different provider, a home equity loan, or a cash-out mortgage refinance. The process starts with researching potential lenders and submitting a loan application, which involves credit checks and income verification. A credit score of 620 or higher is generally considered a good starting point for securing favorable refinancing terms.

If a home equity loan or cash-out refinance is pursued, an appraisal of the property may be required to determine its value and available equity. Once the new loan is approved, closing procedures are initiated, using the new loan funds to pay off the original solar loan directly. Closing costs for these refinancing options range from 2% to 5% of the loan amount, covering fees such as origination, appraisal, and title services.

Selling Your Home with an Existing Solar Loan

When selling a home with an existing solar loan, the most common method is to pay off the loan at closing. The remaining balance of the solar loan is integrated into the closing statement for the home sale. Proceeds from the sale are then used to satisfy the solar loan in full, ensuring the property is conveyed to the new owner free of this encumbrance.

This approach simplifies the transaction for the buyer, as they do not inherit the solar loan obligation. The homeowner’s real estate agent or the escrow company coordinates with the solar loan servicer to obtain an accurate payoff statement, valid for a specific period, often 10 to 15 days, to ensure the exact amount is available at closing. This ensures a smooth financial settlement during ownership transfer.

If the original loan agreement permits, the buyer may agree to assume the existing solar loan. The process for assumption involves the buyer applying directly with the solar loan servicer for credit approval. If approved, a formal assumption agreement is executed, transferring the loan responsibility to the buyer.

Real estate professionals, including agents, escrow companies, and closing attorneys, facilitate the management of solar loans during a home sale. They ensure all necessary payoff statements are obtained, funds are properly disbursed, and any required lien releases, such as UCC termination statements, are filed. This coordination helps prevent delays and ensures a clear title for the new homeowner.