California solar financing: Ygrene vs. HERO Program

California is the most popular state for solar power. Even so, the upfront costs of a solar installation can be high, so some homeowners turn to solar financing to help them make the switch to solar.

A popular way to finance solar systems in California is through a unique program known as the PACE financing program. Two of the most popular PACE programs in California are run by Ygrene Energy Fund and Renovate America’s HERO program.

Ygrene and HERO Program are both PACE loans - what does that mean?

Property Assessed Clean Energy (PACE) financing is a financing option for homeowners who install solar panel systems on their property. PACE can also be used to finance other home improvement and energy efficiency projects.

California is one of three states that offers residential PACE financing, along with Florida and Missouri. PACE loans can be used to finance 100% of the cost of a solar system.

Unlike a traditional loan, there are no regular monthly loan payments with the PACE financing program. Instead, PACE financing is repaid through payments on a homeowner’s property taxes. This means you will have an additional line item on your yearly property tax bill that will go towards paying off your PACE financing.

The loan payments, which are referred to as PACE property assessments, occur over the term of the loan. The terms for the PACE financing program can be as short as five years or as long as 30 years. So if you have a 20-year financing term, you will pay PACE assessments over the course of 20 years.

What sets PACE loans like Ygrene and HERO Program apart?

Approval for PACE loans is not based on your credit score, and your payments on it will not affect your credit score. This makes PACE financing a popular option for people with lower credit scores, as they are more likely to be approved for the PACE financing program than they are for traditional bank loans.

What really sets PACE loans apart from traditional loans is that the loan is attached to the property, not to you. That means if you take out a PACE loan to finance a solar system but decide to move out of your house, you don’t have to pay off the remainder of the loan. The next property owner will continue to pay off the loan through increased property taxes.

It is important to note that using PACE financing will put a lien on your property. That means if you miss payments, you may run the risk of losing your property. This may make it difficult to sell the property in the future.

Now we'll discuss the two most popular PACE financing companies in California: Ygrene Energy Fund and Renovate America’s HERO Program.

What is the Ygrene Energy Fund?

Ygrene Energy Fund is a company that specializes in residential and commercial clean energy financing, specifically through the PACE financing program. Ygrene PACE funding is provided through private partnerships. Since the company’s founding in 2010, Ygrene has funded over 64,000 projects in total.

How do I qualify for the Ygrene Energy Fund?

Qualifying for a Ygrene loan is simple. Your property must be located in one of Ygrene’s service areas and you must have 10% equity in your home. If you are eligible, Ygrene will then determine if you have the ability to pay back the loan.

Your payback ability is determined by your salary, your mortgage payment history, your monthly debt obligations, and various other factors. Ygrene does not specify a minimum salary needed to qualify.

Your solar system must also be installed by a Ygrene-certified contractor in order to take advantage of their PACE program.

What are Ygrene Energy Fund’s term lengths and interest rates like?

Ygrene offers financing terms up to 30 years, depending on your financial needs. Up to 100% of the solar system’s purchase cost can be covered by the loan and your loan payment will be represented as a line item on your yearly property tax bill.

Ygrene interest rates vary based on the customer - the company does not specify what their minimum and maximum interest rates are for PACE financing. But generally, PACE financing options will have interest rates ranging between 8% and 9%.

There have been reports of Ygrene charging customers additional fees at the start of financing. However, there is no mention of fees on Ygrene’s website.

What is the HERO Program?

Renovate America, one of the largest financing providers for solar and energy upgrades, offers PACE financing through their Home Energy Renovation Opportunity (HERO) Program.

How do I qualify for the HERO Program?

To qualify for the HERO Program, your property must be located in one of Renovate America’s service areas. To be approved for a HERO loan, you must have at least 10% equity in your home, be up to date on your mortgage and property tax payments, and you must have the means to pay back the loan.

The HERO Program also requires your solar system equipment to meet certain standards. Both solar panels and solar inverters must be listed by the California Energy Commission as an SB-1 compliant product in order for your project to qualify for a HERO loan.

The solar panel system must also be installed by one of Renovate America’s certified solar contractors.

What are the HERO Program’s term lengths and interest rates like?

The HERO Program will issue financing that covers 100% of the cost of your system. There is no minimum or maximum interest rate listed on the HERO Program website, but they do provide access to sample financing agreements which shows an interest rate of 7.69% for the state of California.

You might not receive this exact interest from the HERO Program, but it gives you an idea of what to expect. The HERO program allows their loans to be paid back over the course of 5, 10, 15, 20, or 25 years. The longer your financing term is, the more interest you will wind up paying.

The sample financing documents also outline four fees you can expect when getting PACE financing through the HERO Program:

• A program administration fee: a one-time fee equal to 5.17% (5.79% in Los Angeles County) of the project cost that covers administering the program;

• A recording fee: a $75 fee that covers the cost of recording the PACE assessment on your property;

• A one-time assessment administration fee: a $155 fee covering administration costs associated with property assessment; and

• An annual assessment administration fee: a $40 fee added to the assessment lien on your property tax bill. This fee can increase in the future, however, it cannot exceed $70.

That's a lot of fees.

For example, if your solar system cost $15,000 to install, you would have to pay upwards of $1,000 in fees to the HERO Program for the first year you have your system. That doesn’t include your loan and interest payment or any recording fees that your county may require for the assessment of your property.

Ygrene vs. HERO: which PACE loan is right for you?

The first thing to consider when trying to choose between Ygrene and HERO is whether or not your property is in their eligible service area. If your property is not in one of their service areas, you cannot take advantage of their financing programs.

You can find out if you’re in either Ygrene or Renovate America’s service areas by entering your address on their websites or by checking their list of service areas.

Although Ygrene focuses on PACE financing for energy saving projects, they provide much less information on their financing than the HERO program does. This lack of transparency from Ygrene could be concerning, as it makes it much easier for them to add hidden fees and requirements to your financing terms.

While they do have numerous fees (which could certainly add up), the HERO program provides helpful sample financing agreement documents, so you know what to expect. These sample documents outline what kind of fees you could be charged, what interest rates you could receive, and what kind of obligations you have to pay back the loan. This makes it much easier for homeowners to see if HERO financing is right for them.

Overall, both Ygrene and the HERO Program are similar. Interest rates will vary on a case-by-case basis, there is no minimum credit score requirement, and they will both cover 100% of the cost of a solar system with flexible term lengths.

Although financing a solar system through options like PACE programs ease the initial burden of upfront costs, your long-term savings will be much higher if you buy the solar system in cash.

By using our solar calculator, you can see how much you can save over the lifetime of a solar system when you finance versus purchasing the system outright.

Our estimate can help you determine if a PACE loan is the right financing option for you.