Energy program expands to Dixon

The Property Assessed Clean Energy program was approved last week by the Dixon City Council. It is already in most of Solano County. This program allows homeowners to add many kinds of energy improvements to their houses through one of eight or nine private finance companies such as HERO or FIGTREE. Just Google PACE NATION to find out more about this creative program that started after the financial crisis in 2008. PACE is supposed to do three things. No. 1: Save consumers money on energy costs. No. 2: Create jobs for home improvement contractors that sell and install energy-efficient upgrades like dual pane windows and solar and No. 3 Help the environment with clean energy and water conservation. It is incredibly easy to qualify for this financing. Fico scores and overall credit rating are not critical and proof of income is not required, making it easy for homeowners to obtain large amounts of money to finance energy and water conservation home improvements. Realtors and mortgage professionals are starting to run into occasional problems with this financing because the amount of the loan is assessed on the homeowner’s property tax bill and paid back to the finance company through the county tax collector. The problem for realtors is that some lenders will not allow their borrowers to assume this financing and the sellers don’t realize that if they sell the house that the balance on the financing has to be paid in full at the sale date just like any other mortgage. Most home improvements are financed through traditional home loans like second mortgages or home equity lines of credit and secured by a deed of trust against the property. This PACE financing charges 8.35 percent with a fee of around 5 percent of the loan amount. The borrower pays the loan back over 10 to as many as 20 years via their semiannual property tax bill. Easy money can create financial hardship if you don’t look before you leap. I saw a young man finance $40,000 worth of water conservation improvements in his backyard last year to replace his grass with pavers and concrete. The good news is he will have a very small water bill and a pretty cool backyard but the bad news is that he will have to repay the $40,000 at 8.35 percent over the next 20 years on his tax bill. His property taxes went from $400 per month to $663 per month and because of the amount of the debt he was handcuffed on refinancing his first mortgage because his debt ratios were too high and because he did not have enough equity to pay off the PACE financing. I suggest talking to a professional mortgage banker, certified financial planner, lawyer, CPA or real estate broker before you do anything substantial on your home.