A Primer on Financing Energy Upgrades

When you get your Action Plan from Carolina Sustainability, there will be some low-/no-cost items. Other needs will be more costly. Different financing arrangements suit different clients' needs. Some basic options and considerations are outlined below.

Regardless of the plan you choose, keep this in mind: the rule of thumb is energy upgrades recommended from a good home performance review will save you 20% to 40% on your annual energy bill. So do the math; look at your expected savings and compare that to any loan payments you might be considering. Many folks find their monthly energy bill savings is greater than the loan payment. And think about what other investments yield an annual return greater than energy upgrades. Not to mention comfort, indoor quality, resale value... ah, but I digress.

If resources allow, upgrades can be paid for out of pocket. Another option is a pay-as-you go strategy; implement some upgrades, use the energy savings to pay that off, then "bank" the ongoing savings until ready for the next phase. This works well with our multi-level format of the Sustainability Pyramid.

If money is to be borrowed, the likely best option is to use funds from a home equity line of credit if you have one already. The interest is deductible, rates are lower than for most other loans, and you can conveniently borrow what you need when you need it. If you do not already have an equity line of credit, the fees required to establish one will be a drawback. Another option is to open a new credit card. The better your credit, the more options you will have to sign up for a deal with zero interest for a while, or cash back, or maybe both. When you finish paying for the upgrades, consider whether or not to keep the card.

A third borrowing option is to refinance your present mortgage and get cash out of your equity. Not everyone will qualify for this, and finance costs are a consideration. An option that is not very available these days is a signature loan. If you are a member of a credit union, and they hold your mortgage, this might still be an option for you.

Be sure to explore tax credits/deductions and available incentive programs through utility companies or counties/municipalities. The go-to source for exploring these options is DSIRE. This national database is maintained by NCSU's Clean Energy Technology Center (formerly the NC Solar Center).