The Reserve Bank dropped interest rates yesterday, but it remains to be seen how many banks will provide some home loan relief to mortgagees.
However, one way to reduce the duration of home loan repayment pain and cut a mortgage by 4 years is to install solar panels says the Sustainable Energy Association of Australia (SEA).
The SEA’s Professor Ray Wills based his calculations on the following.
– 25 year $100,000 mortgage
– 1.5kW solar power system at $3,000*
– System purchase price added to mortgage
– $600 saving a year in generated electricity costs (at 22 cents per kWhr)*
Professor Wills says if the entire energy saving is used towards increasing fortnightly repayments of $350 on a mortgage with a 7.5% interest rate to $375, the $103,000 mortgage would be paid off in 21 years; representing the equivalent of a 0.25% interest rate cut on the loan.
“The proportional savings are smaller on larger loans, but still deliver real savings. On a $200,000 mortgage, the contributed savings from 1.5 kW solar panels (taking the mortgage to $203,000) would shave just over two years of a 25 year loan,” states Professor Wills.
He also points out that as electricity prices increase, the value of savings also jumps and a mortgagee’s ability to service the loan should not be compromised.
While buy a solar power system outright will of course work out much cheaper in the long run as some of the electricity savings won’t go towards loan interest charges, the SEA’s figures show adding the purchase price of a rooftop solar array to a mortgage appears to be a viable option; although the organisation also urges consumers to seek independent financial advice.
*According to solar solutions provider Energy Matters’ web site, the electricity savings from installing a solar power system varies from state to state. Approximate savings for various system sizes in each state can be viewed on the company’s solar specials pages or by using the company’s instant solar quotes tool.
Energy Matters also points out a 1.5kW system can be purchased outright for under $3,000 currently and the company also offers a payment plan with no interest.
