September 20, 2018  //  BY Team DataTree

Homes With PACE Loans: Don't Pass On These Picante Loans


If you’re a home or business owner who is always looking for more ways to go green, then you know making clean energy upgrades to any property is going to cost you a pretty penny. Luckily, PACE or Property Assessed Clean Energy allows property owners to borrow money for clean energy projects for both commercial and residential properties. The first PACE program was implemented in 2008 in Berkeley, California. The original idea behind the program was to help homeowners overcome the pricey up-front costs of upgrading to a more energy-efficient home. This is because, before, if homeowners were to pay out of pocket to power their homes via solar power, they would most likely never see any ROI when selling that home. PACE allows both homeowners and other property owners to place a lien on their property and pay only for the benefits that they’re actually using. 

How Does PACE Work?

First, approval for PACE financing is needed. The equity of the property in question will be used as collateral in order to successfully secure your PACE loan. Once approved, the amount borrowed to finance your project(s) is added to your property taxes and paid gradually over time. According to the Department of Energy, the property owner must “repay their improvement costs over a set time period — typically 10 to 20 years — through property assessments, which are secured by the property itself and paid as an addition to the owners' property tax bills.” 

What Types of Projects are Funded by PACE?

Both residential and commercial property owners use PACE to fund projects that aim to conserve energy, save water, create renewable energy and protect against natural disasters, depending on where they live (i.e., hurricane-prone states like Florida). Some of the projects include but are not limited to:

  • Solar panel installations
  • Energy-efficient HVAC systems
  • Water-efficient upgrades for your home and property
  • Energy-efficient window treatments
  • Reducing greenhouse gas emissions
  • Natural disaster protection

PACE financing is a great option for making your home, business or another commercial property greener, but there are definitely some disadvantages of utilizing the program as well. Let’s take a look at the pros and cons of choosing to participate in the PACE program. 

The Good

Qualification Is a Breeze 

PACE financing is easy to qualify for since approval is based on the property’s equity, as well as the property owner’s ability to make their property tax and mortgage payments. 

There are ZERO Upfront Costs

PACE loans offer 100 percent financing with no need for a down payment. Because of this, you're able to start on your clean energy project right away. 

Time Is on Your Side

With PACE financing, loans can be paid off in 5-20 years, allowing you the ability to keep your payments low. 

More Benefits Than Just Having a "Greener" Property 

With PACE funding, you may be eligible for potential tax credits down the road. For example, you might qualify for environmental tax incentives for "improving the environment" by using solar panels to heat or cool your home. Additionally, your PACE loan can be transferred to the next property owner should you decide to sell. This is because PACE loans are attached to the property, not to the owner. 

The Bad

High-interest Costs

Because PACE is added to your mortgage or property taxes, interest rates increase due to a higher accrued balance. In turn, high-interest costs increase the likelihood that a homeowner will default on their mortgage. Plus, the longer you take to repay the loan, the more interest you pay in the long run. 

More Risks

Increased risk of foreclosure as many PACE loans are in "first position," meaning a home can still go into foreclosure if all mortgage payments are made and PACE payments aren't.

Don't Be Caught Off Guard

Make sure you don't let PACE loans catch you by surprise. PACE loans pros seem to outweigh the cons, but do the research for yourself and then decide. 

Whether you’re a homebuyer, business owner, realtor or lender, it’s important to know a property’s PACE financing information. With DataTree, you're able to access a database of more than 6 million recorded documents that offer home loan data, allowing you to determine which properties are prime candidates for energy efficient upgrades or PACE financing. You can search for a particular property, and if the property has a PACE loan associated with it, there's a notification icon letting you know that the property's lien document is available for viewing. Additionally, you're able to build a list of properties with a PACE loan in order to better target those properties for a lower interest refi. For more information and access to home loan data across the United States, contact DataTree today.


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