BY ALEX HARRIS UPDATED FEBRUARY 14, 2023 10:56 PM 00:15 01:33
Skyrocketing insurance premiums, energy costs and hurricane risks have made routine improvements to Florida homes — like new roofs, impact windows and doors and upgraded AC units — more necessary than ever before.
But as the need for these projects grows, so does the cost. And most Floridians don’t have tens of thousands of dollars of cash on hand to pay for them.
The traditional options, like a loan from the bank or refinancing a home, are still popular. For low-income homeowners, government grants are available to ease or entirely eliminate the cost burden for these improvements. And new players, including nonprofit lending agencies like SELF and unique financing structures like PACE, are now available and growing in popularity.
So where should a homeowner looking to finance one of these projects start?
“My advice to homeowners who want to do improvements on their home is get the lowest interest rate you can,” said Phil Stoddard, chair of the Green Corridor, which oversees the largest PACE provider in the state.
Stoddard and his wife added a new roof and solar panels to their South Miami home more than a decade ago, and they refinanced their home to do it. Combined with federal tax credits for rooftop solar, Stoddard said he’s confident it was a good financial decision for his family.
With energy prices set to spike again in April and insurance premiums continuing to rise, the timing is right too. Floridians pay no sales tax on impact windows, doors and garage doors through June 30, 2024 — a 6% savings.
TRADITIONAL: When paying for something major, the first place most homeowners might turn to is traditional finance. A home equity loan is a lump sum loan that uses the already paid-off portion of a home (the equity) as collateral and is repaid in monthly payments with interest. The interest rates are usually set.
A home equity line of credit allows homeowners to tap that same already paid-off value like a credit card for around 10 years. Borrowers can write checks or use a debit card attached to that limit and pay the lender back in minimum monthly payments. Interest rates for this product can be flexible, which means they could start low and jump high after a while.
Homeowners can also refinance their homes by taking out a new mortgage, paying off their old mortgage and using the remaining cash to fund upgrades. That frees up money for any sort of project, but it means changing to a new interest rate and — in most cases — extending the length of your home loan.
All of these options require a high credit rating, a steady income and available equity in the home, which can disqualify many homeowners. And with interest rates hovering around 7% (the highest since October 2007, according to CNBC), they can be an expensive choice.
GOVERNMENT GRANTS: Florida has a new $150 million program to help homeowners afford storm-hardening projects. The My Safe Florida Home project, which opened for applications in October, offers free home inspections and matching grants of up to $10,000 for homeowners who qualify. However, competition will be fierce. Minus administrative costs, the program’s total budget could help around 11,000 homeowners, if each got the maximum grant.
Details on who qualifies and how to apply are available on the website: mysafeflhome.com
From the federal side, the Weatherization Assistance Program is designed to help low-income homeowners afford energy efficiency improvements, which can include replacing doors and windows or an AC unit. Normally Florida gets about $3 million a year for this program, but in 2022 the federal government gave the state another $93 million to split among all counties. More information about qualifications and application are available on Miami-Dade’s website.
NONTRADITIONAL: An increasingly popular option for home repair in Florida is the property assessed clean energy program, also known as PACE. PACE is unique in that it allows homeowners to borrow against the value of their home and repay the loan (plus interest and fees) via their annual property tax bill.
It’s often incorrectly marketed as a government program, but PACE is run by various private companies. These companies, and especially market leader Ygrene Energy, have drawn a lot of controversy in the state over shoddy contracting complaints and allegations of misleading marketing. PACE providers place a lien on the home that takes priority over any existing mortgages, which means that in the case of a foreclosure, the PACE provider gets paid before the bank does. That’s drawn the ire of the banking industry, and the nation’s leading mortgage holders — Fannie Mae and Freddie Mac — refuse to purchase the mortgage of a home with a PACE lien.
That’s made these homes harder to sell at times, so some sellers have chosen to pay off the lien in full before a sale. But the program has helped thousands of homeowners install improvements. Stoddard, the former mayor of South Miami and a leading environmentalist in South Florida, said the program can be a great option for people who want access to greener and safer upgrades to their home but maybe don’t have the good credit or steady income stream necessary for a traditional loan. “For some people, PACE is particularly good because it’s not based on your income and it doesn’t necessarily count as debt on your debt sheet,” Stoddard said.
But PACE isn’t the only option for homeowners with low credit and unsteady income streams. Nonprofit lending company Solar Energy Loan Fund, or SELF, has made a toehold in Florida’s market by financing small loans for low- and moderate-income homeowners. The company writes unsecured loans for conversion from septic tanks to sewer lines, roof replacements, new air conditioners and even solar panels. Duanne Andrade, executive director at St. Lucie County-based SELF, said her company structures loans around what people are able to pay and boasts a nearly 99% repayment rate since it launched in 2010. “What we understand is that, especially in low and moderate-income markets, you need to provide low-interest capital, mostly unsecured, that people can afford to pay that can take them on a transition to clean energy in a step-by-step process,” she said.