Property Assessed Clean Energy (“PACE”) financing makes it easier for homeowners to afford energy-efficient and safety related home improvements. PACE financing is a great alternative to home improvement loans as it allows homeowners to access their home equity to fix up their home with no money out-of-pocket. Although the PACE program is available in various states, it is becoming a popular home improvement financing option for homeowners in Florida and California.
With PACE homeowners can finance 100% of the cost of their eligible home improvement projects and products. Unlike traditional financing, PACE uses private capital to fund every eligible home project. The program is often referred by consumers as a PACE loan for home improvements; however, PACE is not categorized as a loan. The proper categorization is a voluntary property tax assessment. The financed amount is attached to the property, not the borrower, and is collected through a voluntary assessment on the property tax bill. A lien is placed on the property until the financed amount is repaid in full.
Just like any other type of financing available in the market, PACE financing also has interest rates and fees associated. Similarly, to traditional financing, the interest rates and closing costs vary by PACE provider, also known as a PACE program administrator, and the home improvement contractor selected. Some contractors have the ability to offer lower fixed interest rates than others. The interest rates a contractor is able to offer may be based on their relationship with the PACE provider. Contractors with larger volumes of PACE eligible projects can generally offer the lowest rates.
PACE financing interest rates
In Florida, a typical PACE assessment financed through Ygrene has an average interest rate of 7 percent.1 In California, a typical PACE assessment financed through Renovate America’s PACE program – Home Energy Renovation Opportunity (“HERO”) – has an average interest rate of 8 to 9 percent.2
There are other PACE providers in the market that can potentially offer homeowners lower interest rates than the ones mentioned above as well as being able to refer homeowners to multiple contractors that may have the ability to offer some of the lowest rates. Click here to contact an authorized PACE provider in your area to get a FREE No-Obligation quote.
PACE Financing Fees
The closing costs associated with PACE financing are rolled into the financed amount. Homeowners may have the option to pay all or a portion of their closing costs out of pocket, if they are able and choose to do so. The customary PACE financing closing costs include but are not limited to:
Financing Costs: One-time fees incurred at the time of funding which cover the costs of origination.
Pre-paid Interest: Depending on when the PACE financing funds, payments on the financed amount may not begin until the following year’s tax statement. Pre-paid interest is the amount of interest that is added to the financed amount for the period prior to the first tax year in which payment is made. This is similar to how any other financing works, the amount of interest between the funding date and the first day of payment is added to the total financed amount.
Annual Administrative Fee: Each year an administrative fee will be included in the annual payment on the property tax bill. This fee covers the annual costs to place the PACE assessment on the property tax rolls and manage the tax payments. These expenses may vary over the term.
Some PACE financing companies may be able to offer low to zero closing costs but at a higher interest rate or vice versa. In certain circumstances it may be more beneficial for homeowners to pay higher closing costs for a lower interest rate if the savings on the total interest paid over the life of the PACE assessment exceed the amount paid in closing costs. Homeowners are encouraged to perform due-diligence and shop their PACE financing with multiple PACE providers and multiple PACE registered contractors to ensure they get the best pricing and financing terms possible for their eligible home improvement project.
Click here or call 866-891-6879 to contact an authorized PACE provider in your area. An expert PACE financing adviser will answer all of your questions and provide you with a FREE and No-Obligation quote.
PACE financing is subject to credit approval. Underwriting requirements may vary and are subject to change. Additional underwriting requirements and restrictions apply. PACE financing may be required to be repaid upon refinance or sale. Homeowners should perform due diligence before selecting a home improvement contractor. PACE financing is private financing that must be repaid in full. PACE financing is not a government subsidy.
- Sun Sentinel. Thinking about a PACE loan? Here’s what you must know. https://www.sun-sentinel.com/business/fl-bz-pace-financing-customer-complaints-20180208-story.html
- National Consumer Law Center. PACE Energy Efficiency Loans: Good Intentions, Big Risks for Consumers. <https://www.nclc.org/issues/pace-energy-efficiency-loans.html