Paying for Solar Panels: Sale of Taxable Assets vs HEIL?

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Paying for Solar Panels: Sale of Taxable Assets vs HEIL?

Post by Shaoya » Mon Apr 12, 2010 4:04 pm

Our neighborhood association has put together an opportunity for households to have solar panels installed. The price, through bulk-purchasing, together with state & federal tax credits, makes this an amazing opportunity e.g. a 3.5 kilowatt system has a net cost of ~$4,900 (but with an upfront cost of ~$15K).

My wife & I want to do this, the question is this:

Should we pay the upfront cost by selling taxable equities or get a HELOC/HEIL loan?

Background info
Emergency Fund – 4 months of living expenses

Mortgage –30 year fixed at 4.75% (refi’d May 2009)
Credit card debt – none
Student – 1.6% fixed @ $130 a month.
Car – no debt
Plan to be in current house until I’m carted out in a box.

Married Filing Jointly – 15% Fed
Hers – 34
His – 37
Have $24K in long-term capital loss carry-over to offset any gains because of sale.

Available Financing
Umpqua Bank’s Greenstreet Lending program ( ... reenStreet), in connection with this opportunity, is offering $5-$50K home equity loans @ 7% for 15 years. Bank pays all closing/appraisal costs

Taxable Assets
Upfront cost of solar panels is ~6% of assets available in our taxable accounts.

Again, I’m simply trying to figure out which way to go to pay for this. Please let me know if additional info is needed.

Thank you - Shaoya

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Post by DSInvestor » Mon Apr 12, 2010 4:15 pm

How much dividends are you getting from your taxable investments? If you don't reinvest those dividends, you'd be able to spend them and reduce the need to sell shares. If 15K up front cost is 6% of assets in taxable, that implies 250K in taxable, which may generate 5K of dividends per year.

If the purchase is still some time off, you may be able to use current cash flow and dividends to build up cash reserves and pay for most of the project with cash.

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Post by Shaoya » Mon Apr 12, 2010 4:44 pm

Good idea, but looks like ~$600 in dividends after Q1 2010. [Vast majority is in VG Total Stock Market Index Admiral.] Unfortunately, this decision needs to be made in next few weeks. Other ideas? Thanks

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Post by KCJayhawker » Mon Apr 12, 2010 5:32 pm

I'd get the HELOC, but mainly because this won't be the only time you'll have to make a decision such as this. I have a HELOC and manage large purchases using it vs. selling assets/depleting emergency funds. At 6% tax deductible interest it's a helluva a great way to finance projects such as the one you are considering.

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Post by englishgirl » Tue Apr 13, 2010 9:02 am

I got a HELOC. But I got mine through ING Direct, and am currently paying 4% (adjustable). If the rate were 7% I might think again as that seems high to me. Also, check how they will calculate your payment. The rebates come through in lump sums - I got one big check from the state, and will get some more in the next couple of weeks from my federal tax refund, but with the ING loan, the payments immediately went down when I paid the state rebate check in.

Edit: changed current interest rate from 3% to 4% - it went up!

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