Solar Panels and Mortgage Lenders

What Are Solar Panels?

In simple terms, solar panels are 3 dimensional frames usually put on roofs that contain a group of solar cells that absorb energy from the sun and turn it into electricity or heat. There are two types of solar panels. Solar thermal panels and photovoltaic solar (solar PV). There are several reasons why a homeowner may choose to install solar panels, for example:

• Provide cheap or free electricity
• Environmental benefits of renewable energy
• The government's Feed-in-Tariff scheme paid for green energy

Can You Get a Mortgage on a House with Solar Panels?

While solar panels are increasingly common across the UK, they can be expensive to install, which is often the source of the issues with solar panels and mortgages. There are subsidies available, but many people choose to pay for their solar panels using a loan. Meanwhile, other homeowners lease their solar panels to save on installation costs. Mortgage lenders and third-party solar panels are where most issues occur.

Owned Solar Panels VS. Leased Solar Panels

Whether or not you'll have problems securing a mortgage on a property with solar panels will likely come down to whether the solar panels are owned by the previous homeowner or leased. Before completing the property purchase, you must determine whether the solar panels will be part of the sale. If the previous owner has bought the solar panels outright, they may want to take them to their next property. Some solar panel lease agreements also allow this.

If the solar panels are staying where they are and will be part of the property sale/purchase, you’ll likely face one of two possible scenarios:

Owned Solar Panels and Mortgages

The ideal scenario for most buyers would be that the seller paid for the solar panels and left them at the property for the new owners. The hassle of removing and reinstalling solar panels often means sellers decide to leave them. They'll also have to pay for any property damage caused by removing the panels. As a buyer, you’re unlikely to face any issues when applying for a mortgage on a property with solar panels. After all, you'll get a mortgage on a property with free solar panels.

Leased Solar Panels and Mortgages

If the property you’re buying has solar panels that are leased or rented, things can get a little more complicated. Some lenders refuse to lend on properties that have leased solar panels, while others that do lend on them have strict criteria. If the lease terms state that the panels' financial responsibility transfers to the new property owners, lenders will want to work that into their affordability assessments.

However, the previous property owners may continue to be responsible for paying off the outstanding lease on the solar panels. In that case, there will likely be certain legal issues lenders will want to consider before deciding to approve a mortgage.

Why Is It Difficult to Get a Mortgage with Solar Panels?

While homeowners may benefit from the cost savings on the energy they consume thanks to the solar panels, this might also make getting approved for a mortgage more challenging.

Installing solar panels can cost over £6,000, so "Rent a Roof" schemes that offered to install solar panels for free and cover their maintenance and insurance became popular. As part of the agreement, homeowners must keep the panels for around 25 years, while the companies earn income by selling energy to the National Grid through Feed-In Tariffs.

While Feed-In Tariffs and Rent a Roof schemes have ended, past contracts with solar panel companies have many years left to go. If a homeowner sells their home, the solar panels and the ongoing contract are passed on to the new homeowners. This can put off both prospective buyers and mortgage lenders, especially as a crucial part of the house, the roof, is subject to a complex lease agreement, complicating the valuation of the property.

Which Lenders Provide Mortgages on Solar Panel Properties?

As the number of homes in the UK with solar panels has soared recently, many high street lenders have updated their terms to accommodate these types of properties. For instance, Nationwide, Halifax and Accord are just some of the lenders that will consider mortgage applications for properties with solar panels. However, each lender has its own lending criteria that’ll consider your specific circumstances.

Do Solar Panels Devalue Properties?

Whether solar panels devalue properties largely depends on how long ago they were installed. If they were fitted more than ten years ago, for example, you’re in a good position to prove your energy savings to potential buyers for that period. However, some research suggests that while solar panels don't add much value to a property price, they’re considered an attractive addition by many potential homebuyers.

Can I Remortgage If I Have Solar Panels on My Home?

It’s possible to remortgage if you have solar panels on your home. However, it does depend on your circumstances and the lender's criteria. If you have purchased the solar panels and own them outright, there are fewer risks, and most lenders will be satisfied. But if you’re renting solar panels, you may find it more difficult, although this will depend on the terms of the lease agreement.

Can I Remortgage to Finance Solar Panels for My Home?

Many lenders will let you remortgage your home to raise funds for solar panels. It's common for people to remortgage for home improvements. However, you must ensure that you factor in the maintenance of the solar panels into your calculations. If you own your home outright, getting a remortgage for the amount you require should be fairly easy, especially as the amount you'll need will be quite small in relation to the value of your home.

Can I Buy Out a Solar Panel Lease?

Some solar panel leases feature buy-out clauses enabling a new owner to buy their way out of the lease. The buy-out cost is usually equivalent to the price of installation, around £10,000 to £15,000. If you want to buy out your solar panel lease, you'll have to discuss this with the leased panel owner (who might be the property's previous owner) or the installation company. If the property looks to be difficult to mortgage with the solar panels, you might be able to arrange for the buy-out to happen before completion.

The lender will be more likely to lend on this basis. If there is no buy-out clause in the lease, this may become more expensive and complicated. If this is the case, you must speak to your lender and solicitor as early as possible.

If you successfully buy out the lease, you’ll become the owner of the solar panels and responsible for their maintenance costs. Once you've settled the lease, you can keep or remove the panels. It's important to know that lease agreements often come with very high early repayment charges, similar to mortgages. If you’re selling your home, you might consider passing on the lease to the new buyer, assuming they can get a mortgage that allows them to do so.

How Much Will It Cost to Remove Solar Panels?

If you own the solar panels on your property outright and want to remove them, you can expect to pay anything from £500 to £1,500 to remove them. This amount doesn't include any costs you'll have to pay to replace parts of the roof if required.

Should I Buy a House with Solar Panels?

The issues surrounding lease agreements may put off some buyers. However, in most cases, they can be resolved. Most lenders will approve a loan on a property with leased solar panels provided the lease meets certain conditions. For instance:

• The panels can be removed without incurring missed Feed-in Tariff payment penalties
• The installation of the solar panels is insured and approved
• The installing company is accredited by the Microgeneration Certification Scheme (MCS)

The more information you can get from the seller about the solar panels, including copies of the lease, building and planning consent, and details of payments, the easier it’ll make your property purchase.

Property Renovations

When purchasing a property with solar panels, it's important to remember that you may not be able to do an extension, loft conversion or other renovations that may disturb the solar panel installation.