PACE: Fact vs Fiction
There is a lot of information to sift through when you are deciding which financing option will be best for your next home improvement project. With so much to take in, how can you separate fact from fiction? Here are four common misconceptions about Property Assessed Clean Energy (PACE) financing, and how they differ from the reality of this flexible and valuable financing option for homeowners looking to make their homes safer and more energy-efficient.
Fiction #1: The PACE program is a government-imposed loan
FACT: Though the federal government approves PACE financing, it is not a government-imposed loan or subsidy. PACE funding is made through public-private partnerships with PACE providers called PACE program administrators. With PACE financing, homeowners can obtain long-term financing at competitive, low, fixed interest rates. There are no obligations to participate in the PACE program. The program has many consumer protections and safeguards that ensure that homeowners fully understand the financing program.
PACE: A Little History
The United States has been using land-secured financing districts, or special assessment districts, for over a century to pay for public interest infrastructure improvements. With PACE financing, state and local governments can extend the use of land-secured financing districts to fund energy-efficient and safety-related home improvements on private property.
You can see a full list of projects that qualify for PACE financing here.
Fiction #2: Property taxes will be raised with PACE
FACT: While payment for a project financed through PACE is done through a separate line item on a homeowner’s property tax bill, it does not increase your property taxes. Both your property taxes and the financed amount from the PACE program are due on the same schedule, so the total amount due on the property tax bill bi-annually or annually will increase due to the combined amounts (property taxes and PACE payment). Once the homeowner has repaid the financed amount back in its entirety, the line item will no longer appear on the property tax bill.
Fiction #3: The risk of foreclosure is higher with PACE
FACT: This common myth has the opposite effect - PACE has shown to have a positive impact on the housing market from a research study led by the Institute of Market Transformation (IMT). When a homeowner makes energy-efficient upgrades to their home, they will be spending less each month on their energy and water bills, and these home improvements help to increase their home’s property value.
According to the IMT research study, homes that have energy efficiency improvement work done have a substantial and significant reduction in their default risks - up to a third less risk.
Fiction #4: Only people with poor credit scores can use PACE
FACT: PACE financing is not biased towards a particular credit or income profile. The average FICO score of PACE customers is 705, and FICO scores between 670–739 is considered good.
PACE financing is not contingent solely on an individual’s credit history. Instead, it is a combination of factors, as well as the available equity in your home, that play a more significant role in determining your PACE interest rate. Since having a less than stellar FICO score is not a problem or barrier to access, PACE financing is often an attractive option for many homeowners who have built up equity in their homes.
Other options for financing your home improvements include unsecured loans, personal loans, a home equity loan, a Home Equity Line of Credit (“HELOC”), or other traditional property-secured loans, which can include pros and cons like higher interest rates, upfront costs, or stricter underwriting requirements. Compare how PACE financing stacks up to these other more traditional financing options.
FACT: PACE Assessments Help Many Homeowners
PACE financing offers homeowners the ability to benefit immediately from home improvement energy savings while enabling them to pay for their upgrades over time with the following key advantages:
● 100% project financing (up to $250,000)
● Competitive, low fixed interest rate
● No required upfront costs
● No prepayment fees
● Comprehensive disclosures
● Direct customer support
● Multiple repayment terms
The built-in customer safeguards of PACE financing also ensure you are informed on every aspect of your project from solar installation to HVAC to windows, doors, or even a more energy-efficient roof over your head.