If you are currently in a situation where you have an outstanding loan on your home and have been making over-payments, check with your bank to see if you have a no-fee redraw facility, which is quite common these days. You will probably find the over-paid funds on your loan are better off being put to work reducing your electricity bill with a solar PV system than offsetting your interest repayments on your home-loan. Most variable home loans have an interest rate slightly below 5.00% p.a. at the time of writing in October of 2015.
The extra interest cost on $8,000 drawn from your home loan’s overdraft account could be as low as $400 per year or $100 per quarter. If you’re saving $408 on your electricity account each quarter, you’re ahead by a quarterly $308. You don’t need to be a rocket scientist to see the great opportunity here! If you were disciplined and put that $308 saving back into your home loan account each quarter, you would pay off your home even sooner too. Obviously interest rates fluctuate so the interest cost may go up, but so do electricity usage rates! If we make the assumption electricity rates will go up in the future, which is a fair assumption based on the historical rate of change, this means the savings from generating your own electricity will be magnified every time the rates everyone else pays are increased.
Another concept to keep in mind is it makes sense to incorporate the solar system into your home loan because you are adding the physical system to the roof of your physical home. If and when you ever decide to sell your home, the solar system will be sold with it and the value of the system should be included in the property valuation from your real estate agent; therefore, you will regain some of the cost of the solar system upon settlement, knowing the valuation of your home should be slightly increased due to the fact it comes with its very own solar PV electricity generating machine.