PACE financing, also known as Property Assessed Clean Energy financing, is a public financing program that helps property owners finance energy efficiency, renewable energy, and water conservation improvements. PACE financing is a loan that is repaid through a special assessment on the property’s tax bill. The loan term is typically 20 years, and the interest rate is typically lower than a traditional home improvement loan.
PACE financing is administered by a third-party PACE program administrator. The PACE program administrator will assess the property and determine the cost of the energy efficiency, renewable energy, or water conservation improvements. The PACE program administrator will then issue a loan to the property owner for the cost of the improvements. The loan is repaid through a special assessment on the property’s tax bill.
PACE financing is available to most property owners, including homeowners, businesses, and non-profits. The property must be located in a jurisdiction that has a PACE program. There are currently over 30 states and over 500 jurisdictions that offer PACE financing.
PACE financing can be used to finance a wide variety of energy efficiency, renewable energy, and water conservation improvements. Some of the most common types of improvements include:
There are several benefits to using PACE financing, including:
There are a few drawbacks to using PACE financing, including:
Imagine a homeowner, Jane, who wants to make her home more energy efficient. She plans to install solar panels and a new HVAC system. Here’s how a Property Assessed Clean Energy (PACE) financing deal might look for Jane:
Jane receives an initial assessment from a PACE-approved contractor who gives her an estimate of $25,000 to install solar panels and a high-efficiency HVAC system. These improvements are expected to significantly lower her energy costs and reduce her home’s carbon footprint.
Jane applies for PACE financing through her municipality or a PACE program administrator. She provides necessary documentation and information about her property and the proposed improvements.
Jane’s PACE application gets approved. The terms of the financing are for a 20-year repayment period with an annual interest rate of 6%. These terms translate to annual payments of around $2,140, which will be added to Jane’s property tax bill.
The PACE-approved contractor installs the solar panels and the HVAC system. The PACE program administrator pays the contractor directly once the work is completed and properly verified.
Starting from her next property tax cycle, Jane sees an increase in her bill corresponding to her PACE loan repayment. Despite the increase in property tax, Jane notices her energy bills have significantly decreased, allowing her to offset some of the costs.
Jane continues to make her annual payments via her property tax bill over the 20-year term. If Jane decides to sell her property before the term ends, the PACE lien and its payment obligation can be transferred to the next property owner, subject to agreement and local program policies.
Remember, the terms, rates, and other details might vary from one PACE program to another and could also depend on the specific circumstances of the homeowner.
PACE financing is a financing option that can help property owners finance energy efficiency, renewable energy, and water conservation improvements. PACE financing has several benefits, including no upfront costs, lower interest rates, longer loan terms, and tax benefits. However, there are also some drawbacks to PACE financing, such as the special assessment and the lien.
If you are considering using PACE financing, it is important to carefully consider the benefits and drawbacks before making a decision. You should also talk to a qualified PACE advisor to learn more about the program and to see if you are eligible.