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Financing Solar With House Bond

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Hi Everyone.

I hope all is well. I am paying off our house by means of a bond. I do not have the financial capacity to install solar and batterys. Is one able to rope the cost of a solar installation into my bond payments? Any advice will be great!

Sincerely

Jason 

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Personal opinion, layman's 2c. Even if you have accumulated capital on the bond you can access, don''t use a 20-year repayment period for equipment that will have a shorter lifespan than the loan. For example, if the inverter and/or batteries might only last you for five-10 years, make sure you pay extra into the bond to pay it off earlier as if it were a 5-10 year loan. It might make more sense to pay the panels off over the life of the bond.

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10 hours ago, Energy said:

Hi Everyone.

I hope all is well. I am paying off our house by means of a bond. I do not have the financial capacity to install solar and batterys. Is one able to rope the cost of a solar installation into my bond payments? Any advice will be great!

Sincerely

Jason 

I guess the normal mechanism to do something like this would be to contact the bank and ask if you can re-mortgage. If your house is worth more than the current outstanding bond (you’ve already paid off some) then you could technically access additional funds that way.

Obviously then you need to make sure that you can afford to repay the new installments. I’m not a financial advisor, but I’ll second what @GreenFields said. It is safest to make sure you can pay off the bond for the parts over its useable lifetime, and not over the term of the house. For example, you don’t want to finance a car over 20 years if it will break after 15 and then you need to keep on paying the scrapped car off for 5 more years while you need to purchase another car on a new bond.

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Posted (edited)
2 hours ago, GreenFields said:

don''t use a 20-year repayment period for equipment that will have a shorter lifespan than the loan

Indeed. I was also taught this. Don't roll the car loan into the home loan, because then you end up paying off (usually multiple) car(s) over 20 years. Only do this if you have the discipline to pay a car-sized extra payment into the bond. Then it can be an excellent way to get a lower interest rate on the car.

1 hour ago, jykenmynie said:

ask if you can re-mortgage

I asked about this once. Apparently what they do is they take out a second mortgage for the additional value (if any). This mortgage may be at a different interest rate and may even run a different term. You then pay off both mortgages at the same time, or you pay the one while servicing interest on the other... or something. Can't remember this second part 🙂 I ended up not doing it.

Edited by plonkster

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I guess the easiest way to look at is 

  •  As per usual do you want to save cost or stick it to the man....

If it is the latter - go for it as there is no argument for principle decisions.

On the other hand ..
In CPT it looks like average cost is about R2.50 per unit if you are going to use less than 1000 units per month - just got the value of a quick google search ..
Lets assume that most people can get Prime + 2% , although some of my clients recently go as low as Prime -2 - rather stick to the upper part cause if that one work it will definitely work the other way :) .

Last time I checked a halve decent solar/battery unit wil set you back at least R 150 000 but lest rather work on R 200 000. 

Interest on R 200 000 @ 9.25% (7.25% + 2%)  will be about R 1500.00 pm or R 18 000 - With the bond repayment over 10 years R 2500.00 over 20 years it will drop to R 1800.00 but you will pay more interest.

Lets work on R 2500 pm - that would be close to what you would be paying every month for 1000 units. So on the surface it looks like it could make it BUT you then make the assumption that you are now off Grid and not paying CPT else that will add to the cost per month. (Extra 300 units will be R 720.00 on top of your current bond and that will burn disposable income)
If you have a R 200 000 setup chances are you will need to change your lifestyle to match your system and as a result you will end up using less units per month if you were on grid.

Factor that back into the first calculation and it becomes near impossible to justify setting up solar system on a bond for non commercial use - (Commercial changes it quite a lot as you need to factor in loss of production ectr. )   Also keep in mind that rates are as low as what I personally think it will drop so don't bank on it for too long... 

Rather start to setup the household to become solar friendly , solar geyser , gas stove ectr. Once you have reached that goal you can then recalculate if it is worth converting. You might find that a small hybrid system to cover you base load and have some capacity available for load shed will be much more profitable in the long run and that you could do without needing a bond or if you need to the saving will justify the cost.. 

From my side there is one variable that makes it  a little hard to factor in and that is battery tech. Last time I checked you could get lithium's for about R 2.75 per unit. In theory if you buy a bank now it will "cap" your cost per unit for the duration of the batteries lifespan and you could offset that against Eskom increases in the future. . Unfortunately as it has been proven over the years in the forum batteries do not last for ever and if they do go it is away messy. 
 

 

 

 

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14 hours ago, Energy said:

I hope all is well. I am paying off our house by means of a bond. I do not have the financial capacity to install solar and batterys. Is one able to rope the cost of a solar installation into my bond payments? Any advice will be great!

manners first, all well thanks.  you and yours? 🙂

Fact: all the major South African banks seem to offer some sort of "alternative energy" finance option. There are also numerous smaller/independedent finance options specifically aimed at solar (I am not posting links to these or the banks ...they can generate their own traffic). You should be able to access your bond to finance shiny things on the roof (suspect solar is the new Gucci for some people..if you understand Afrikaans there is an Anton Goosen song that deals with things on a roof...and Gucci) -  especially if you are a bit ahead on the bond (been paying extra every month...) or have reduced the outstanding amount a bit.

Opinion: Unless you MUST, don't do it for the reasons as already posted by the much more qualified members. How to test?....see how eager the bank is to finance/refinance etc. what you want.... the more eager they are the more likely you know you are to get screwed from a financial benefit perspective. It is different if you are a business/commercial enterprise that NEEDS electricity to produce income... or work from home with potential VAT and tax benefits ... but then you would likely have asked the question to the people doing all those nice income statements and depreciation calculations  etc. for the friendly people at SARS ( not the one that used to operate trains). If you need to power grandma's iron lung, maybe also worth it.....

Advice: If you need to keep up with isidingo...or want to avoid the barefoot dance of joy, with all known and newly coined expletives as backing tune, after stepping on a lego in the dark (that also gets you called into school because the source of the stray legos repeated your gansta rap to absolutely no amusement of his grade 2 teacher)... rather buy a torch and a chess board.

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2 hours ago, introverter said:

There are also numerous smaller/independedent finance options specifically aimed at solar

True but these are mostly aimed at commercial applications and the rates will me more or less the same. The only difference is that the "hardware' are , in some cases , considered as collateral.. 

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32 minutes ago, PaulF007 said:

rates will me more or less the same

Yup. I noticed that so-called renewable loans have rates no more favourable than a personal loan or a credit card. It appears to be no more than marketing (hey, look at us, we care about green.... you know, other than money!).

Many many years ago someone at Exsolar who did the math (now we're talking amost a decade ago) told me that if you took the money out of the bond to install a grid-tied solution, your savings on electricity will more or less equal the extra interest on the bond. That was without batteries. This may have shifted slightly: electricity costs more now, PV-modules became cheaper, interest rates are super low right now, so you may well win a little bit if you did it right now, but only if it is pure grid-tied. Let me just stress, I have not done the math. This is my "gut feeling" speaking.

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If it is a business that install solar for their use, you can claim the full installation amount from tax in the first year. If you time this well with the installation it could work well with only a short time bridging finance required (which ever means) https://mybroadband.co.za/news/energy/316745-tax-breaks-for-south-africans-who-install-solar-power-systems.html

A buy to lease option may be also something to look at https://businesstech.co.za/news/technology/276873/cape-town-based-buy-to-lease-solar-startup-gets-cash-injection/

But in the end I always try to not lend money if I can. 
So my suggestion (for myself) would be is to save up by putting in as much as I can into the flexi homeloan. By saving into your home loan you in essence get a very good savings rate (you homeloan rate say is prime, thus you are saving at prime) and any monthly mortgage payments will reduce more of the loan capital (cause you have extra money saved in there). In the end you save double. You get a higher rate for your savings and a reduced payment duration for your bond.

I would not use money from a homeloan I have not first saved extra into that loan. (i.e. don't enlarge the loan or take a second mortgage) 

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