How free solar panels can affect your mortgage
Posted by Cathy Debenham on 24 May 2012 at 9:07 am
Q: Will installing solar panels impact on my mortgage?
A: Recently the Guardian published an article about a couple that had been refused a mortgage by a number of lenders as they had installed "free" solar panels on their roof, through a "rent-a-roof" scheme.
This couple thought they had done the right thing. They sought approval for the rent-a-roof contract from their existing mortgage provider and their mortgage advisor before they went ahead. However, when they tried to remortgage their property they were turned down by the Skipton building society and the Nationwide, and their broker is struggling to find a cheaper deal with another lender. As a result, they are concerned that they might have difficulties selling if potential buyers also struggle to find a loan.
However, the Council of Mortgage Lenders (CML) advises that anyone getting free solar panels under a rent a roof scheme should make sure that their lease complies with the CML standard, plus any individual requirements that their individual lender may specify.
"Recent press coverage of individuals encountering problems after agreeing to the installation of panels may have arisen because the lease does not comply with the CML’s standards, or individual lenders’ requirements," it says. "It is therefore timely to remind both consumers and solar panel providers about compliance with standards for leases to avoid problems in the future."
This problem only affects homeowners who have had the 'free' solar PV installations. These are where companies lease the space above your roof for 25 years. They install the solar panels free of charge, and in return they take the income from the feed-in tariff over that period.
Homeowners benefit from a reduction in their electricity bill from using the electricity generated by the solar panels. This saving is usually predicted to be around £150 a year, but the actual amount will depend on how much electricity you use while the sun is shining and the panels are generating. It may be significantly less if you are out all day.
The primary concern for banks and other mortgage lenders is that their security is not affected by the arrangement. So, for example they will require a clause in the contract that allows them to have the panels removed free of charge if the property is repossessed.
Rent-a-roof installations on social housing should not be affected, although it remains to be seen what happens if the property is sold under the right to buy scheme.
This does not affect homeowners who have bought their solar PV system, just those with rent a roof installations.
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