There has been a bit of press and radio lately (via the SEA's Facts on Solar campaign) about using solar to reduce your mortgage. There is a good summary on the Sustainable Energy Association of Australia's website - here
Does is work ?
Well it's a simple process of comparing the investment returns on a Solar system versus the cost of capital (ie your mortgage rate).
This is where we add a disclaimer around not being able to provide financial advice (make sure you source your own advice from a qualified professional). This is how the basics work:
As at early January, a quality 1.5kw solar power system installed in Perth start from around $1600 after STC rebate. Depending on a number of factors including electricity usage patterns, roof orientation and pitch, it will generate around $500 per year in electricity (through a combination of power offset and selling back to the grid).
A very simple investment return calculation gives you an investment return of 31.25% . So there are two things you can do to reduce your mortgage term:
1. If you have spare cash (say $1600), instead of paying down your mortgage directly (which would save you approx $128 a year in interest (assuming an 8% rate), invest in a solar system now and apply the savings ($500) to your mortgage each year.
2. If you don't have the spare cash but you have equity in your home and a mortgage you can drawdown on, do so (the interest will be $128 a year), but the saving will be $500 per year. Apply those savings to your mortgage.
If you'd like to know how this works in detail and would like a customised projection on solar savings for your home please email us at enquiries@infiniteenergy.com.au and we'll be happy to help.
If you have any queries about mortgages we recommend speaking with Mark Nolan from Sense Financial Services who has helped many of our clients finance their solar systems.
