A popular loan structure offered by companies like Sungage Financial, Dividend Solar, Green Sky, Admirals Bank and Enerbank, consists of two terms with different interest rates: the first term has a low interest only payment, the second term has a higher interest rate whose payment contains interest and principal.
In the US, homeowners that get this type of loan are usually required to apply their ITC tax credit towards buying down (also known as Prepaying) the loan.
- Go to your account Settings. Click on Financing Templates then Create New Template. Give your template a descriptive name that you will later be able to understand.
- In the Basic Information section, click on Loan.
- Click on the pencil icon to input your Project Useful Life and your Discount Rate (we chose 25 years and 3.0%).
- Input your Degradation Factor, Inverter Replacement Cost and Inverter Life (we chose 99.5%, $.35/W and 13 years).
- Input your tax rates (we chose 0%). Please contact a tax attorney for more information on whether your solar project's returns should be taxed. In our experience, in the US residential solar returns are never taxed.
- Add your Incentives.
- Click Add Loan and select Interest Only. Give your loan a descriptive name that you will later be able to understand.
- Principal Percentage should be set to 100%.
- Input your Dealer Fee, Interest Rate, and the Duration of the loan (we chose 4.5%, 0% and 12 months).
- Set Prepayment to Yes. This opens two new fields Percent and Month (we chose 30% and 12 months).
The homeowner is expected to apply her ITC rebate to buydown the loan principal. The prepayment month typically matches the duration of term 1 of the loan.
- Input the Interest Rate and Duration of the second term of your loan (we chose 4.9% and 224 months)
- Read the summary at the bottom of the pop up box to make sure your loan description is accurate. Click OK.
- Lock your immutable fields.
We highly recommend that you lock fields that will not change between different designs. This will save your team time and reduce errors.