Will the bank accept a house with solar power?
More Australians are choosing to live in more regional locations to escape the hectic city life.
However, it’s common for large rural blocks or hobby farms to have no or minimal access to basic utilities like town water, gas or even electricity.
Many of the properties just rely on solar panels to get their energy but is this acceptable to lenders?
How much can I borrow?
You may be able to borrow up to 95% of the property value, or up to 100% with a guarantor, for a home with solar panels if you can meet certain requirements:
- Connection to power: Whether it is power poles or solar panels, the property valuer will be checking to see that the property has working power.
- Access to water: You must have access to either town water or tank water (your borrowing power will be limited to 80% for bore water access).
- Connection to sewerage services: There needs to be a proper system in place to manage waste such as a built-in septic tank.
- Land size: Your rural block is more likely to be approved if the block is less than 50 hectares (ha).
- Location: Most lenders have their own postcode restrictions and will require your property to be within 100km a major city or regional town.
- Zoning: Properties zoned industrial, commercial or agricultural will generally fall under commercial farm lending.
Call us on 1300 889 743 or fill in our online enquiry form to discover if you’re eligible for a home loan to buy a property with solar panels.
Why do lenders have a problem with solar power houses?
Lenders are not adverse to solar panels, specifically.
The issue is that the majority of properties off the electricity grid tend to be in rural or semi-regional locations.
Lenders are always concerned about the market for a unique property in a unique location. That’s in the event that they had to sell your property in case of default.
For standard properties in metro locations, many banks will complete what is known as a “kerbside valuation” to determine that there is, in fact, a property on the block.
For unique properties, a more thorough valuation is required so there is a bigger chance for the valuer to flag potential issues with the property that will reduce their final valuation.
On top that, it can be difficult for the valuer to find comparable sales, especially if neighbouring properties are many kilometres away.
Luckily, each lender has different risk appetites and our mortgage brokers can often negotiate approvals with the key decision makers in the credit department.
Why solar panels can be a better option than power poles
If a rural property doesn’t have electricity, one solution is install power poles to connect to the closest power lines.
This can cost you roughly $10,000 per pole plus another $10,000 charged for transformers, cables, and removal of any trees in between the property and the closest electricity grid.
It is not uncommon for a larger lifestyle blocks to be half a mile away from the nearest electricity grid making it ridiculously expensive to run the power lines up to the property.
For small household consumption, solar panel installation can cost you less than $5,000, not to mention save you thousands in electricity bills over the long-term.
The long-term investment benefits over solar panels
- Successive Australian governments have, and will likely continue to, provide rebates on solar power installation.
- You can save thousands of dollars every year, if you produce more electricity than you consume, then the power will be added back to the grid and you can get further rebates!
- Within 5-6 years, your solar panels will likely have paid for themselves.
- For investors, lower energy bills are a great selling point for any potential tenant.
- Solar leasing is an option offered by energy providers that allows you and your tenant to avoid much, if not all, of these upfront costs of installation.
Disclaimer: The information above shouldn’t be taken as financial advice. We recommend that you talk to a financial professional before you make any financial decision.
Going off-grid with standalone power system (SAPS)
Energy retained by the solar panel can be converted into electricity using several systems.
When you use a grid connect power system, there are more chances of casualties because of the wires involved. But when you use a standalone power system, it does not include grids and charges a bank of batteries instead, so it is a safer option.
Going off-grid will lower your chances of casualties like bushfires, which are eminent in Australia.So, lenders have a higher chance of accepting your home loan because of the reduced risk
Currently, standalone power systems can be deployed only as an emergency response. However, if you want to apply for a permanent one, you can do so through the Australian Energy Regulator(AER).
Need a home loan to buy a property with solar power?
We have a team of credit experts who have years of experience and understand how to present a strong case to get your rural property mortgage approved.
Give us a call on 1300 889 743 or fill in our free online assessment form today.