pay off morgage or get solar panels, what's most economical?

Re: pay off morgage or get solar panels, what's most economical?

SolarLurker has hit all the main points, I think.

One thing to keep in mind is that solar PV will continue to get cheaper - the SunShot Initiative is aiming to get the installed price down to $1/watt by 2020.

As prices decline, so will tax credits and rebates.

Anyway - based on current numbers - it looks to me that your PV install today will net a better return than paying off your mortgage - assuming no substantial repair costs are incurred. Keep in mind that inverters are typically warranted 10-15 years - and what happens if your panel manuf goes out of business?

Of course - all of this ignores the other benefits of PV - clean power!

Re: pay off morgage or get solar panels, what's most economical?

No mortgage is the way to go. In fact if you are able, pay your monthly mortgage till it hurts. 15 year mortgage is way less total payment to the bank than 30 year mortgage with the same interest rate. In other words, don't work for the bank for 30 years if you can work for the bank that owns your mortgage for 15 years.

Go online and look for a mortgage calc and plug in say 5% and principal owe $200000. Plugin 15 year and 30 year. Total life of the mortgage would be $285k and $387k. Minus principal $85k interest to the bank versus $187k. Monthly payment difference $1,581.59 versus $1080. $500 extra a month. What are going to do for the next 15yr mortgage free?

The first 3 years of 'owning' our house, we were on a 30 year mortgage because we couldn't get a credit history when we moved from Canada. Then we managed to get a 10 yr mortgage for 4.75%. Paid it off in 7.5 years. That was more than a year ago. Paid off the house with initial 20% down. Mortgage free now. I don't work for the bank/mortgage anymore.

Don't worry about the tax return on mortgage. It is significantly small based on income. In other words, don't step on the dollar bill to pickup a penny.

Now, I can work on my solar experimental projects. This is our method.

Re: pay off morgage or get solar panels, what's most economical?

On financing, just a different tack - do not incur any credit card balance at all. Pay it all off monthly. Do not pay minimum monthly credit card and save the money in bank. The math is just insane. Credit card are usually 12.5% to 28% compounded daily versus mortgage ~5.75% vs bank saving 0.1%. So pay off credit card first then mortgage. Pay off the amount that has the highest interest rate first obviously.

In other words, spend within your income limit.

Re: pay off morgage or get solar panels, what's most economical?

SolarT wrote: »

On financing, just a different tack - do not incur any credit card balance at all. Pay it all off monthly. Do not pay minimum monthly credit card and save the money in bank. The math is just insane. Credit card are usually 12.5% to 28% compounded daily versus mortgage ~5.75% vs bank saving 0.1%. So pay off credit card first then mortgage. Pay off the amount that has the highest interest rate first obviously.

In other words, spend within your income limit.

I used to be the short gratification credit purchaser poster child, but finally figured out the game my old man always told me that would work better. I totally agree with the debt free life, I bought this place in 1997, worked like a dog for 6 years and paid off the 110K mortgage. In the mean time I cleared all my other debt. Then for the next few years I fixed this place up, added a pool. did the landscaping, etc.

This allowed us to start to get ready for retirement, and start to put away assets. Not to say that I won't leverage some credit now, but always with the short term plan to clear it before the expenses of the debt gets large. Credit cards are paid off every month, car loans are only to get to a point of pay off in the short term usually with large down payments. We are never slaves to the credit, and always have a nice contingency fund stashed to cover it if needed.

A couple things happened, my marriage stress went way down, we could plan for the things we like and need , like our PV and thermal solar systems and the new workshop building. We can fully participate in our 401K plans and Employee stock plans while saving more on top of that. We learn to live on a less demanding cash position every month. Bills are minimal. Our credit scores soared.

Without a interest on solar system the ROI was much better and helped in the justification to spend the money.

The way the tax system is today you have to have a fairly large mortgage to get any tax break to beat the standard deduction. I much prefer paying the taxes which amount to about 1/3 of the income vs paying 100% to a bank to save that 1/3.

I think we went one further than "live within your means", we live well under our means and it makes a huge difference in what you can really do in life. That also prepares you for the fixed income time of life we all come to eventually.

Re: pay off morgage or get solar panels, what's most economical?

G.O.O.D

Get out of debt. Own your home, really own it. Your cash flow will be through the roof. You will not be beholdened. Solar cost will be easy peasy without that mortgage payment...

Yes I know Uncle Sam is giving you credit for the interest you pay on the mortgage but so what. That is a whole different ball of wax that doesn't quite fit into this forum. Don't get me started....:p

Re: pay off morgage or get solar panels, what's most economical?

While I am a fan of being debt free, an argument can be made that debt on an appreciating asset can be a good tool. In th days of inflating house values, leveraging a 20% down on an $X house has made sense.

The other way to look at is is, are you paying more in mortgage interest than you could reasonably safely return on another investment. During the halcyon days of the 90s buying on steep mortgages freed cash to out in other investments tht paid more than the mortars cost net/net. Now that the yield on other reasonably safe investment vehicles is way down I suggest paying off the debt.

Debt is in essence, a too to be used wisely, and too m any don't use it wisely. How many folks do you know of who paid off expensive CC debt by refinancing the house, so now they are spending 30 years to pay off their blue jeans? The really stupid ones went out and wracked up big CC debt again, leaving them in an ever bigger hole.

It worked fine,,,until the house values didn't keep up!

As for p aging off the debt or a buying solar, factor in your comfort factor owing money, guess at what your energy costs are likely to be going forward, and the make the choice.

Tony

PS. I would never (if I could avoid it) have debt on a depreciating asset, like a car. How many people are under water on car loans the day they drive off the lot. Buy a cheap car to get by, then pay yourself the car payment for t he next one!

Re: pay off morgage or get solar panels, what's most economical?

Here's another scenario, I have X$ in a IRA that is basically setting there drawing 1.2%.
I pay an average of .184 per KWH today, who knows next year.
I can invest in a system that will cover my usage most months saving me roughly $2000.00 a year for less than $5.00 a watt ( A LOT LESS IF I INSTALL IT MYSELF).
I've been told that it WILL NOT ever pay for itself.
I must be dumb, but I think a $ saved is a $ earned.
The taxes would be basically a wash if I took it out of the IRA and got the 30% tax credit.

Re: pay off morgage or get solar panels, what's most economical?

tmarch wrote: »

Here's another scenario, I have X$ in a IRA that is basically setting there drawing 1.2%.
I pay an average of .184 per KWH today, who knows next year.
I can invest in a system that will cover my usage most months saving me roughly $2000.00 a year for less than $5.00 a watt ( A LOT LESS IF I INSTALL IT MYSELF).
I've been told that it WILL NOT ever pay for itself.
I must be dumb, but I think a $ saved is a $ earned.
The taxes would be basically a wash if I took it out of the IRA and got the 30% tax credit.

Is it a Roth? Are you of age to pull it? If it is a regular IRA pull half the money one year and the other half the next. do a system with commissioning date in Dec. and float the balance to Jan. with the local CU or bank on your next draw.

But I am no tax advisor.

Re: pay off morgage or get solar panels, what's most economical?

I have to second the motion for a refinance unless you can pay your current mortgage off in less than 2 months. Go to aimloan.com and look at the rates. You could refinance to a 4.5% 30 year fixed for next to nothing out of pocket. The amount you will pay in fees will be paid for in 1 to 2 months max on what you pay in interest.

Re: pay off morgage or get solar panels, what's most economical?

I didn't read every post....but... I suggest: pay off the mortgage. Some people say "Then I lose the tax deduction". Well, I'd rather pay taxes and keep what's left over than to give it all to the bank. We drove ourselves hard our entire married life to pay off the mortgage & WOW, you won't believe how life changes once you don't have that payment!

Re: pay off morgage or get solar panels, what's most economical?

Shane Jackson wrote: »

I have to second the motion for a refinance unless you can pay your current mortgage off in less than 2 months. Go to aimloan.com and look at the rates. You could refinance to a 4.5% 30 year fixed for next to nothing out of pocket. The amount you will pay in fees will be paid for in 1 to 2 months max on what you pay in interest.

i was in real estate for too many years (21)- what you're not allowing for is the closing costs on the new loan - general rule we used was a refinance was viable only if a) 2% or greater drop in interest AND b) you will be keeping the property another 7-8 years to recover the closing costs. Otherwise, the savings are not there

and another consideration - don't know how long this seller has been paying on this mortgage - but assuming 8-10 years, he's starting to move into stronger principal reduction with each pmt. First few years of the mortgage, very little of the pmt goes toward the principal.

Re: pay off morgage or get solar panels, what's most economical?

i'll concede i didn't read your entire post earlier, but that aside, not sure how to reconcile our difference

i ran the numbers too many times and unless there's been some developments since i left RE (1991), like zero or minimum closing costs, 2% difference was the break even on refinancing with 7 - 8 years planned on keeping the property & new mortgage

2nd concern, assuming true zero closing costs (not closing costs added to new mtge total) i've seen too many fees hidden or folded into the new mortgage - the mortgage brokers have to make a living doing the refinance - if there were no profit, there'd be no reason to write em.

and then there's the possibility of prepayment penalties structured into the existing mortgage that will have to be paid at the refinance settlement.

Re: pay off morgage or get solar panels, what's most economical?

The Original Ralph wrote: »

i'll concede i didn't read your entire post earlier, but that aside, not sure how to reconcile our difference

i ran the numbers too many times and unless there's been some developments since i left RE (1991), like zero or minimum closing costs, 2% difference was the break even on refinancing with 7 - 8 years planned on keeping the property & new mortgage

2nd concern, assuming true zero closing costs (not closing costs added to new mtge total) i've seen too many fees hidden or folded into the new mortgage - the mortgage brokers have to make a living doing the refinance - if there were no profit, there'd be no reason to write em.

and then there's the possibility of prepayment penalties structured into the existing mortgage that will have to be paid at the refinance settlement.

Generally speaking you are correct. As for the low cost closing, what is happening is the opposite of paying points to reduce the interest rate. Instead of getting a 4.250 with no points he would be getting a 4.500 with a rebate towards closing.

Again without knowing his exact numbers it is impossible to say what the best course of action would be.

Shane

Re: pay off morgage or get solar panels, what's most economical?

I can go for the $20,571 cumulative savings over 25 years, but that is a lot more than a few percent ROI on $6000. $20,571/25 = $823 per year / $6000 = 14%

Re: pay off morgage or get solar panels, what's most economical?

I've got a 6K system installed and sure hope that it does better than my IRA as far as ROI.
At the current rate from the utility (.19 cents per KWH) it makes some investments look worse.
If it lasts 25 years it will still cost less than a vehicle that will depreciate faster and it cost less than most of them ( little over $4.00 a watt).