No banks required - solar cuts four years of your mortgage.

With no prospect as yet of Australian Reserve Bank interest rate cuts announced on 6 December 2011 being passed on by home loan lenders, there is another way to reduce your mortgage according to the Sustainable Energy Association of Australia (SEA - 

Solar panels installed on your home could allow you to cut as much as four years off a 25 year $100 000 mortgage.

With the price of electricity for both domestic and business customers increasing, solar panels deliver electricity that, combined with existing Federal Government rebates, can potentially pay the investment in panels back within 4-7 years, with the effect that electricity sourced from those panels after that point will be at no cost.

If this is factored into repayments over the life of a mortgage, it represents a substantial saving on the total cost of the mortgage.

Assuming a set of solar panels installed for $3 000 (net price with Solar Credits multiplier) for a 1.5 kw system yielding around $600 saving a year in generated electricity costs (at 22 cents per kwhr), adding the purchase price to a $100 000, 25 year mortgage to $103 000, if the entire energy saving is reinvested instead to fortnightly repayments of $350 on a mortgage with a 7.5% interest rate to $375, the $103 000 mortgage would be paid off in 21 years.

This is a better outcome than a 0.25% interest rate cut on the loan.

As the savings are set by the output of a 1.5 kw solar array, the proportional savings are smaller on larger loans, but still deliver real savings. On a $200 000 mortgage, the contributed savings from 1.5 kw solar panels (taking the mortgage to $203 000) would shave just over two years of a 25 year loan.

Investing more in a larger solar system of say 2.5 kw would have an even bigger impact (assuming the household uses more than $1 100 worth of electricity in a year).

For a $100 000 mortgage, adding a 2.5 kw solar installation would add $9 000 to the mortgage, but would shave more than five years off the life of the mortgage, assuming all electricity savings were spent on repayments.

The same system for a home with a $200 000 mortgage (taking the mortgage to $209 000), would return further electricity savings, that would create a four year reduction in that mortgage.

‘Of course if electricity prices rise the value of savings increases, and your ability to pay off your mortgage would not be compromised by rising energy bills,' says Professor Ray Wills, SEA Chief Executive.

‘Always seek independent financial advice, purchase wisely, and as with any significant investment, get a second quote on a system with comparable specifications, and choose a reputable supplier.'

‘One way to be more certain of the reliability of the business you are dealing with your is to look for an installer that belongs to the Sustainable Energy Association or a similar reputable industry body', says Prof Wills.

More information on solar panels can be obtained from SEA's, or about SEA and its members from SEA's website


No banks required - solar cuts four years of your mortgage.

SEA Media Release - 7 December 2011