What’s wrong with this picture? Off-Gridder Brenda Reed has money problems because her off-grid home can’t get financing. Does anyone know a good broker that can help?
My husband, Tom and I live in a rural area of Mendocino County, CA on 77 acres in the lower foothills, above a little town named Hopland. The town is so small that there is not a single traffic light and only 1 stop sign on the main road. The nearest power pole is about a mile away.
Everyone and their brother is wanting to learn how to install solar right now because it’s the “green thing” to do and there’s plenty of financing options to purchase a solar system, but we are finding that the refinancing offered to conventional houses is not currently available for off-grid renewable energy houses, or it’s very, very challenging to get.
Oddly enough Hopland is the home of the Solar Living Institute which offers renewable energy and sustainable living workshops on its 12 acre site. This is where I am employed to assist people who travel from all over the US in selecting workshops to become PV installers, solar sales people & to learn to raise goats, chickens, build alternative houses, & much more.
But my husband did not learn from a workshop how to design and install our solar system; he enjoys reading magazines like Home Power, and is able to apply what he’s read. We live in our off-grid solar house that is 1 year new and we are pretty proud of it because we acted as the contractors for most of the work (we are not contractors but we read up and educated ourselves in how to manage house construction). We bid out the jobs that we couldn’t do ourselves, hired subcontractors & took charge of the project. We made all decisions regarding the materials to build with, worked in on our time frame and were able to build the house from start to finish in about 7 months, with Tom doing a lot of the work himself.
It’s a passive solar design with an open front basement. The main level has solar water heated tubes (radiant heated) running under a concrete color stained floor. The main bedroom is extra large with a large open bathroom with an inviting Jacuzzi (water heated by the sun) surrounded with windows which open out to the beauty of the oak woodlands and surrounding mountains. The kitchen & dining room and living room are all open to receive warmth from the woodstove, which warms the whole house nicely in the winters. The half story upper level has a loft and bathroom and 2 bedrooms. The 21 solar panels are mounted on the standing seam metal roof with the S5 mounting system. We have a 3.4 KW array which supplies enough power for our needs, and a diesel generator for the wintry months when the sun is not out as much. We ran our generator for 160 hours last winter. The panels feed into an Outback combiner box and then into an Outback MX60 charge controller. There are (4) 1055 amp/hr Hawker PV1 batteries wired in series for a total of 48 volts. The 48 volt DC battery power is converted to standard house power by 2 Outback VFX 3848 inverters
We were very excited this last February because we had just obtained our final house inspection by the county and they issued our permits, but then we ran into a snag shortly afterwards. To build the house we did a legal 15 year construction loan with a family member who then decided 2 years later that he wanted to cash out, which forces us to refinance the loan to pay him off. This is when things started getting real interesting as we began the process of trying to refinance our off-grid home.
We are currently running into problems because conventional lenders require that an appraiser inspect the house and give an appraisal of the value which is dependent up comparable house sales. These “comps” are required to be sold within a certain time frame which we were told was about 90 days, and located within a certain distance from ours (our nearest neighbor is a mile away). Well, in Ca and in many parts of the US, not many houses are being sold right now due to tougher lending practices, banks carrying too many bad loans on their books, so many people loosing their jobs, the down-turn in the economy, and many homeowners not being able to sell their homes because the value may be lower than what they owe on the loan. We’re fortunate that we have the equity to support how much financing we need. We were also told that most lenders still consider off-grid homes a “risk” in their portfolio, which makes it harder for us to get a loan.
If you know of anyone who can help please email me at brendareed123@gmail.com as soon as possible.
A comparable sale for us, we were told, would need to include (ideally) solar, some land, and similarly sized house and age. The last house sold in Hopland was 1 year ago (due to foreclosure)and it is on a standard lot, so apparently it is not considered a comparable sale we were told. This a small, rural, sleepy town of under 1000 residents, and many of the homes are on large parcels, and this area is known for alternative types who have solar power, straw bale houses, generators, houses build with all recycled materials, green building materials, etc. Many of these homeowners purchase solar components on the site where I work at the Real Goods store.
Our next obstacle was finding out that many lenders do not like to lend on “land heavy” pieces-meaning more than a couple of acres. So we spoke with an agricultural lender, thinking they are used to lots of land and because we are in a cattle lease with a neighbor. This turned out to be disappointing because they lend at much higher rates than conventional loans (no wonder farmers have a hard time covering their costs and making a living farming!) and the pile of paperwork was enough to make your head spin. We cannot afford to get a loan at 7% when the rates are down to 4.25%.
So, now we are trying a Real Estate Broker, who informed us that the appraisal rules are changing on 5/1/09 and it will be even harder for off-gridder’s to obtain financing because loan officers cannot pick who will do their appraisals. There are appraisers who specialize in off-grid, land heavy, and alternative structures such as strawbale, etc. and they are in a niche that is needed. Many appraisers have no clue what a solar system is (no offense if you don’t, but it is a good time to get educated) or what a grid or lack of a grid is and how to put a value on that. Apparently lenders will be using a “clearing house” for appraisers and brokers will not be able to pick one that they would like to use.
Why should the same rules for obtaining financing for conventional houses be adhered to for refinancing renewable energy houses, especially in rural areas and when house sales are so low, and at a time when President Obama is providing an impressive amount of grant money for renewable energy and renewable energy job training? I feel that lenders need to educate themselves about the many benefits of renewable energy and living off-grid. I also think it’s possibly a lack of education about solar that would lead them to believe that it’s a “risk” to refinance or invest in an off-grid home.
So, come on lending institutions, where are the “green refinancing lenders” who invest in renewable energy houses which already have a solar system installed? So far from the research I’ve done, the Obama stimulus money for renewable energy does nothing for homeowners in our situation. They want people dependent on the “smart grid” or on bringing electrical transmission to homes which currently don’t have power to them. You may have read about the “Off-Grid Loan” from the government, which sounds like it’s for homeowners who are solar off-grid, however, this is money for bringing electrical transmission lines to houses which currently have none. It’s my opinion, but I think those homeowners would be better off if a solar financing program were offered that way they could have reliable power and not be subject to trees that fall on the lines.
So you can see we are having difficulty, but we are not giving up. I think we are actually paving the way for others who are currently thinking of going off-grid, may be presently off-grid, and one day they will need to refinance. Hopefully the economy & lenders will be ready for them. It seems that most people I come across who have alternative houses or who live off-grid have gotten private financing and have not needed to refinance – but that is not an option for us. I also know of others who are off-grid and had no problem refinancing in a good economy, when house prices were much higher, homes were selling, and loans were easier to obtain.
I certainly would not want to discourage Off-Grid.net readers from going off-grid, but it’s important to know ahead of time what you may run into down the road. We didn’t think we would need to refinance and pay off our note to a family member, but the unexpected can happen.
Daryl Hannah interview
Ellen Page on Perma-culture
‘JR’ back on the grid
Greed cheerleaders sleaze splurge
Green nonsense from pooped-out Brown
{ 10 comments… read them below or add one }
Yes, you are the front runners. I suggest you talk to the Obama administration people that are giving out the loans and your senators. See if you can get some mortgages added that encourage solar design under the green designation. Since they are passing out mortgage money with stipulations anyway, this could be another catagory. If you get your senator on board and it is a green project there is a good likely of getting it passed.
We ran into the same problem 4 years ago when trying to refinance our owner built solar home here in Montana. Our original lender apparently did not notice that we were a solar home? Though they would only loan on 10 of our 40 acres. Prior to that we had no mortgage. When refinancing to drill a well and finish the place we ran right into the alternative energy issue. We also have a composting toilet or two but that did not seem to bother anyone? We eventually went with a mortgage through Northwest Farm Credit Services (I think that is the name). They two had issues with the solar but theirs turned out (in the end) to be the need for us to have adequate back up power in case our solar failed (laughing). We have plenty of generator power I just did not realize they wanted that information. Thus we ended up in the “sub-prime” category with a 1% higher interest rate and, yes, we are happy to have gotten it. Eventually the world will figure out that it is “their” power that goes out not ours and things will change. Kathleen
Wabder, Thanks for your suggestion, unfortunately we don’t have time for this lengthy process. It does need to be done though.
I am so glad to read your posting. I am so frusted trying to finance my mortgage, well, septic and solar panels. The banks in the Upper Peninsula of Michigan are not helpful. I am going to try Northwest Farm Credit Services. Anyone can post a copmment if they know of a bank that finances Off-Grid Homes.
I am a former Mortgage broker of 22 years. These kinds of loans are difficult because the secondary market does not want to buy them. However, there are a few places to try. Call some Mortgage Brokers or small banks in Santa Rosa and see if they know how to do USDA(US Dept of Agriculture) rural loans. The USDA insures rural loans so they are easy to sell. Farm Credit is also a good place to start but they are kind of strict. They are also located by region and are easy to find on the web. Sub prime lenders are all out of business so thats no longer an option. There are local investors in most areas that will make loans at a higher interest rate and low loan to value. They are called D paper or hard money lenders. You can find them on the web or the phone book. Use as a last resort. Good luck!
Hi Kathleen,
A sub-prime at only 1% higher would be acceptable to us, but it still seems very unfair considering that we are not asking for money to refi the land, that’s already paid off, we are asking to refi the house. I like your attitude that eventually they will figure out that its their power that will go out, not ours. The sad thing is that lenders think that off-grid is a risk (which is how they justify loaning at a higher rate) and my power is more reliable than people who are dependent on the grid. I’ll check out Northwest Farm Credit Services. Thanks for responding.
Thank you Selina for posting. This is confirmation that this oversight needs to be addressed. Living sustainably and renewably is a benefit to us and to the rest of the world.
For what it’s worth, we have the same problem in Canada. I just wrote a few nasty letters about the environmental impact of CIBC. (They still won’t give us a mortgage, though. Go figure.)
We are very close to getting our final from the county for our off-grid house on 97 acres no too far from Hopland, it’s a few hours east up in the foothills. We are having the same issues getting comps and a loan so if you have had any luck please let me know! Right now we have a hard money construction loan.
We are in the process of buying a cabin that is off grid. The best option is to get a “portfolio” loan which is investor back and not backed by Freddie/Fanny Mae. They do not have to follow the strict guidelines as the big banks. they lend based on business case. With that said your down/ltv may be up to 40% opposed to the usual 20% or less. The interest rate is the same as a normal loan. Call local borkers and ask for someone who does a portfolio loan.