Nate and Danielle talk about their new home equity loan and how it fits into their budget. The reasons why the loan was taken out along with a discussion on how to determine if you can afford a loan are discussed. They also look at the benefits of low-interest rates and how putting extra money on your loans can dramatically lower their payoff period.
Email from Listener:
I would like to see/hear an episode on the solar panels. I would like to know more about the ins and outs of the system from an actual user and not a salesperson. If it’s actually working and cost of maintenance and such. I think that would be interesting for advanced budget people looking for ways to save.
Our system has a rated max output of 11.1 Kwh, which means in perfect conditions where all of the panels are fully exposed to the sun our system will produce 11.1 Kw of power per hour. We are grid-tied, so when power in our neighborhood goes out, our power goes out. It also means that any extra energy we produce makes our electric meter run backwards because we are putting power back onto the grid.
In actuality, all of your panels are never perfectly exposed so we usually produce 9-10 Kw per hour during peak hours (noon). And half of that during other times. The season also matters as we produce 10-15 Kws a day in the winter and we can go over 60 a day in the summer. The sun angle and a bunch of other factors matter when deciding to get solar panels.
Our system cost $36,000 to install. We bought our system because we wanted to enjoy the tax benefits of it. From MD we got $1,000 back and from the federal government, we received 30% of our the $36K back in taxes which comes to $10,800. The tax credit does not disappear if you don’t use it all but you HAVE to have a taxable income and more tax liability than zero. We paid off our entire system in just under 1 year.
Electric bill in the past 12 months = $238.81 or about $20 a month (we only have a bill in the winter months). Total solar production over the past 12 months = 8290.99 Kilowatts or 8.3 Megawatts of power The total power produced since system installed = 15.44 Megawatts
So was it worth it?
Our typical electricity bill was about $100 a month prior to solar panels. So we are seeing a $80 a month savings or about $1,000 a year. That means our panels will take about 25 years to pay off (thank to tax incentives).
We also sell any excess energy we produce through a managed marketplace. We signed a contract that gives us $88 a month for 5 years for the right for the management company to sell our excess power.
So breaking down the total cost:
36K – 10,800 – 1000 – 5,280 = $18,900 as the total cost of the system. We do not have any maintenance to do on the system. Everything has a 25-year warranty minus the inverter which has a 15 year. The cost to replace that is about $5,000.
So our actual payoff is the total cost $18,900/(80*12)= 19.6 years is the total payoff.
Added benefits: Increased home value
Added costs: In the same time period the $36,000 we spent could’ve been put into retirement and earned significantly more in 19.6 years. If your roof needs to be replaced during the timeframe your solar panels are on it increases the cost of roof replacement by about $3,000.
But wait there’s more!
But we also got rid of a gas car and added an electric car since we got the panels. That means we are using a lot more electricity to the tune of 3.5 Megawatts since we have owned the car. That’s about a quarter of our energy usage! Without the car the payoff period moves to 14.5 years roughly.
So was it worth it?
With a 14.5 year payoff period I would like to think that it is. Is it a great investment, no. But after the payoff period is over any savings become pure profit (money saved). If our system is on our roof for the full 25 year warranty period that means we have 10.5 years of profit from the sun. (in our case it’s right around $10,000 in profit.)
Electric rates also rise about 3% a year on average. When we generate a good portion of our own energy, we are a bit more immune to the cost of electricity from our supplier and our actual payoff period decreases while our profit time increases.
So yes, I would say that it’s worth it. It’s not for everyone and you need to be in the right areas to do it, but with some planning, you can have a very successful investment.