Can I Finance Solar Panels with an Equity Loan?
Yes and in 2026, home equity financing matters more than it used to, because the federal subsidy is gone. The 30% Residential Clean Energy Credit (Section 25D) expired on December 31, 2025 under the One Big Beautiful Bill Act. Homeowners who buy a system with cash or a loan in 2026 receive no federal tax credit. That removes roughly $9,000 from a typical $30,000 installation, which makes your financing cost the single biggest lever you still control.
According to BankRate.com, home equity loan delivers a fixed lump sum at roughly 7.36% to 8.08%, and a HELOC gives you a revolving line near 7.23% that you draw as the installer invoices you. Both beat solar dealer financing, which often embeds fees of 10% to 30% into the price. One federal benefit does survive: because solar is a substantial improvement to the home securing the loan, your interest may still be tax deductible. Consult a CPA.
While evaluating your solar energy loan choices, a significant decision is how you intend to finance your system. The good news is that there are numerous accessible solar financing options with home equity loans for homeowners interested in installing solar with minimal or no upfront costs.
Home equity loans and HELOCs are frequently used to fund home improvement projects, with solar panel installations being one of the most popular purpose. Various financing alternatives are accessible for solar panels, including options provided by solar installers. The Home Equity Loan and Line of Credit is commonly regarded as the preferred choice.
With the abundance of solar financing choices and the distinctions among them, questions often arise about the advantages and disadvantages of specific loans. In this article, we’ll provide a brief overview of considerations associated with a prevalent solar financing options like home equity loans and HELOCs.
FAQs
Is there still a federal solar tax credit in 2026?
Not for homeowners who buy their own system. The 30% Residential Clean Energy Credit under Section 25D expired December 31, 2025, terminated nearly a decade early by the One Big Beautiful Bill Act. There is no phase-down and no partial credit — it went from 30% to zero. The IRS treats an expenditure as made when installation is completed, so signing a contract or paying a deposit in 2025 doesn’t help if the panels went up in 2026. The one remaining federal path is third-party ownership — a lease or PPA, where the company owning the panels claims the credit.
Does losing the tax credit change whether solar is worth financing?
It changes the math, not necessarily the answer. Without the credit, a $30,000 system now costs the full $30,000, which stretches your payback period by several years. But two things still work in solar’s favor: electricity prices continue climbing, and state, utility, and local incentives remain — rebates, net metering, SRECs, and property tax exemptions vary widely by state and can still be substantial. Check the DSIRE database for your state before assuming the economics don’t work. Just build your model on a 0% federal credit, not the old 30%.
Is home equity loan interest tax deductible if I use it for solar?
Very likely yes — and in 2026 this is the only federal tax benefit left for a homeowner-owned system. Under rules the One Big Beautiful Bill Act made permanent, home equity interest is deductible when funds are used to buy, build, or substantially improve the home securing the loan. A rooftop solar installation is a capital improvement to that property, so it generally qualifies, subject to the $750,000 combined mortgage debt cap and only if you itemize. Interest on an unsecured solar dealer loan or personal loan never qualifies. Confirm with a CPA.
Is a home equity loan better than solar installer financing?
Usually, and the reason is hidden cost. Solar companies frequently offer “0%” or low-rate financing through third-party lenders, then bake a dealer fee into the system price — often 10% to 30% — which you never see itemized. Ask every installer for the cash price versus the financed price. If they differ, that gap is your real interest cost. Then compare it to a home equity loan at roughly 7.36% to 8.08%, or a HELOC near 7.23%. See current pricing at best HELOC interest rates.
Should I use a HELOC or a fixed home equity loan for solar?
It depends on how your installer bills you. Solar projects pay out in stages — a deposit, a payment at installation, and a final payment after inspection and utility interconnection, which can take weeks. A HELOC lets you draw as each invoice arrives, so you pay interest only on what you’ve actually used. A home equity loan hands you the full amount upfront at a fixed rate, charging interest on all of it from day one. See how HELOC payments are calculated, and compare with our guide to home improvement loans.
Learn How to Apply for a Solar Energy Financing with a Home Equity Loan or HELOC
Your home is your castle, and turning it into the best home it can possibly be is important for anyone.
Not only can certain improvements help increase the way you enjoy your house, but they can also help improve property values and raise equity as well.
One improvement that is getting more and more attention is the installation of a solar energy system.
Of course, a good system isn’t free. If you want to install one on your home you’ll most likely have to find financing for it through a good loan. Luckily you have several different options available to you. Here’s a rundown of some of the best ways to finance your solar energy system.
Home Equity Loan – This 2nd mortgage can be used for virtually anything you like, but smart homeowners will utilize it to help improve their property – including with the installation of a solar energy system. Your ability to secure a home equity loan will be based on the amount you owe on your mortgage compared to its overall value as well as your credit score. It’s well worth shopping around to find the best home equity loan since there are plenty of options out there.
Home Equity Credit Line – A home equity credit line is very similar to a loan, but instead of getting the entire sum up front you’ll be given what is essentially a credit card. You’ll pay fees and interest on only what you have used, making it a very popular choice among home owners. As with a solar home equity loan, you’ll have a number of options and HELOC rates and terms will depend on various factors. Your best bet with either option will be to speak to a lender and determine what your best loan path is and which will work best for you.
Specialized Loans – Some companies are actually focusing solely on green energy loans and on home improvement loans that focus on installing solar energy. This is really taking off in California with companies like Ygrene, but there are plenty of other lenders throughout the country with this kind of environmentally friendly lending focus.
Personal Loans – For a majority of individuals, a suitable financing option for solar panels might be a personal loan. Opting for a personal solar panel loan entails fixed interest rates and consistent monthly payments that remain unchanged throughout the loan’s duration. Certain home improvement loans may offer higher limits or extended terms, facilitating the affordability of more expensive solar panel options.
Government Incentives – Never overlook government incentives when you’re considering upgrading to a solar energy system through a home equity loan. State and federal incentives do exist, and can provide you with automatic rebates, assistance repaying loans, and deductions on taxes if your loans are spent on things like solar installation.
FHA 203K – This is one popular home improvement loan insured by the Federal government. The FHA 203(k) program is an often overlooked solar loan that allows you to finance both the acquisition of a home and the installation of solar panels, along with other renovations or enhancements, simultaneously.
Learn More About Home Equity Loans for Solar Energy from Experienced Home Equity Lenders
As mentioned above, the sheer range of options means that talking to a professional is a good idea.
They can help you understand what kind of government incentives are available to you as well as which types of loans are the best choices for you to use.
Solar energy systems can boost your home values, raise equity, lower energy bills, and make you feel better about where you call home.
As such, they’re a good choice when you’re looking for a remodeling program that will reward you in a tremendous number of ways – financial and personal.
Low Rate Home Equity Loans to Finance Solar Systems
The mortgage rates associated with solar financing options fluctuate and hinge on factors such as the loan type, term, lender, and individual financial situations. Home equity loans generally feature lower interest rates compared to many other unsecured solar loans. This is attributed to the collateral involved (i.e., your home), which reduces the risk for the lender when providing the solar loan.
How Does the Solar Tax Credit Work?
The federal solar tax credit stands as a compelling incentive for homeowners considering solar energy system installations. Following the enactment of the Inflation Reduction Act in August 2022, this incentive has become even more significant, covering up to 30% of the system’s cost.
A survey conducted among over 400,000 U.S. homeowners who received solar quotes on Solar Reviews has provided quantifiable evidence of its impact. According to the data, the tax credit emerged as the most influential financial factor influencing decisions regarding solar energy systems. Moreover, if the full credit is not needed, it can be carried over to subsequent years.
The majority of homeowners are not responsible for covering the entire expense of residential solar installations, owing to federal and state incentives. The federal solar investment tax credit (ITC) provides a 30% tax credit on the total cost of a home solar system installed by December 31, 2032.
Additionally, numerous states extend tax credits and incentives that contribute towards making solar system ownership feasible. To explore available incentives in your state, consult the Database of State Incentives for Renewables & Efficiency (DSIRE). Furthermore, municipalities and utility companies often provide incentives, so it’s advisable to inquire about offerings in your locality. Read more on solar finance tips from the Department of Energy.
How Much Do You Save with Solar Energy in Your Home?
The savings generated by a solar system depend on various factors, including local utility costs, the expenses associated with purchasing and installing the panels, available tax incentives, and the amount of sunlight your property receives. To estimate your savings, consider the following:
Electric bill reduction: Examine your recent utility bills to determine your average expenses.
Time to realize savings: Immediate savings are not guaranteed upon solar panel installation. According to SolarReviews, on average, the payback period ranges from five to fifteen years.
Home selling plans: Research indicates that homes with solar panels tend to sell for approximately 4% more than those without, as per a 2019 Zillow study. However, if you don’t plan to stay in your current home long-term, consider whether potential buyers might be deterred by the panels and whether you would recover the investment before moving.
Anticipated maintenance: Solar panels necessitate regular maintenance, including at least annual cleaning to clear debris. According to HomeAdvisor, the cost of annual cleanings ranges from $150 to $650, dependent on the system’s size, location on the home, and cleaning frequency. Additionally, an annual inspection, costing between $140 and $200, may be required. Source: Nerd Wallet
Updated : HEM Editorial Team | June 2026 | Fact-Checked ✓