No home loan with no utilities
by NICK ROSEN on APRIL 29, 2009 - 32 Comments in off-grid-101

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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.

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32 comments

1 wabder { 04.30.09 at 6:26 pm }

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.

2 Kathleen Czech { 05.03.09 at 2:43 pm }

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

3 Brenda Reed { 05.04.09 at 1:44 am }

Wabder, Thanks for your suggestion, unfortunately we don’t have time for this lengthy process. It does need to be done though.

4 Selina Hochertz { 05.12.09 at 6:45 pm }

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.

5 Doug smith { 05.13.09 at 11:34 pm }

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!

6 Brenda Reed { 05.16.09 at 1:55 am }

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.

7 Brenda Reed { 05.16.09 at 1:59 am }

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.

8 Marie { 05.17.09 at 1:54 pm }

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.)

9 Jedon Thompson { 06.17.09 at 1:02 am }

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.

10 Ross { 06.19.09 at 2:29 pm }

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.

11 Kirk { 02.04.10 at 7:03 pm }

We are using Compass Bank’s special portfolio perm loan for our off grid home construction in Placitas, NM Kirk

12 Scott { 02.18.10 at 5:44 pm }

Hi Brenda-
I fall into the same category. Off grid home, w/generator backup. 34+ acres in calaveras county. I have a manufactured home which makes it even harder. I, also, am stuck with a construction loan. I contact my banker every few months. And get the same ‘no alternative’ for my loan. My construction loan is through Umpuq Bank.
I actually have started to take the time to write to state legislature and the federal government, as well. I never receive much of response.
If you are a conventional home, which it sounds like you are, you may want to give umpqua bank a call.

13 bmc { 04.17.10 at 9:20 am }

Same story in Hawaii.. only I didn’t know till it was too late.. owner financing soon to be a gift back to the owner

14 lrm { 08.19.10 at 1:31 am }

Couldn’t one simly build a dwelling w/’on grid’ options, and then add the off grid after or at the same time? ie, use the off grid as the mainstay, but still have the on grid for better financing options?

I mean, it’s not ideal, but then again, the last thing I want to see is the ‘go green’ absorbed into the consumer matrix. Solar already has begun-and guess what? if you have money, you can have solar, o r a prius or organic food, or…etc etc etc.

I personally think it’s good that conventional loans are not yet available for off-grid. The system WILL eat any form of beneficial, well, anything….Plus, housing costs are insane, and are not a reflection of standard of living requirements for employment, etc.

Anyway, short rant aside, why not put out the extra money up front to have ‘on grid’ to appease lenders? If it means you get a great rate, and also have higher resale value, refinance options, etc., then it probably ends up a better option. Add your off grid over time as you can afford it, or somehow add it as you build or rennovate.

Obviously, this is a simlistic thought-details would need to be worked out. But you know that saying ‘don’t throw the baby out with the bathwater, now’….Things are not usually black or white.

15 lrm { 08.19.10 at 1:32 am }

Are we just trying to be environmentally friendly? Or are we also wanting to create a different economy and different standards for living our lives?

16 vanessa { 11.30.10 at 11:52 pm }

All the comments were helpful. I am off grid, generator back up with propane, we have no land lines at all, plus we have our water delivered. Can’t or rather haven’t found any help to refiance. Here we are in sunny az., and loving our life and yet,…..how do we get fiancing?

17 Moni { 07.03.11 at 10:58 am }

We are also off the grid. Going on the grid is not an option for us because we are 4 miles from the nearest single lane paved road and 45 minutes outside of the nearest town. Our nearest neighbor is about 1/4 mile away, and all our neighbors are off the grid. We have satellite everything – hughesnet for internet, DirecTV, and GlobalStar for telephone (eVoice is great for receiving messages at home). We tried to refinance last fall to a lower interest rate. The lender made us jump through several hoops, which we did. Then told us that they couldn’t give us a loan because we were off the grid. We are currently trying to refinance with our current lender, and the appraiser told us even though the lender had given us the loan we currently have in the past, they may not give it to us now because rules have chanced and they may not be able to give us a lower interest rate because we are off the grid! In this day and age, when there is supposedly an energy crisis – you would think that they would help more people become off the grid instead of putting stumbling blocks for them to do so. Maybe we should all write President Obama letters to let him know that this situation is happening. Also, watch the movie “To Big to Fail” – the banks were given bailouts in order to help people out with financing homes. Instead they used the money to give themselves huge bonuses and golden parachutes. It is very frustrating.

18 Darren { 09.05.11 at 5:40 pm }

Same issues here in Reno, NV. I have private financing but when we tried to refi last year through a bank to help out our credit and get a better interest rate we had a 30 year “veteran” appraiser that dropped the value of our home 20% because it was off grid and then another 20% for being rural. Really? The reality is that we have a power station which should be a 20% increase in the value of our property since we don’t have a power bill (with the exception of winter with diesel for the generator) The problem lies in resale as a broker friend told me. 99.999% of people don’t want to live off the grid as they think they have to pedal a bike to flush to toilet…really I was asked that… but the point is the house is a tough sell to the majority of buyers out there especially in this economy. We’ve been trying to sell for almost 2 years now. We are down at the low value Mr. Veteran Appraiser gave us and we still have few showings and most people get turned off by the off grid. Ignorance is bliss. I won’t let this stop me in the future though. My next home after I move and finish school will be off grid even if I have to get one in town and tell the power company to cut my line. :) Spread the word and maybe someday we’ll be the majority.

19 stone knobs { 09.15.11 at 9:34 pm }

We are in the process of buying a cabin that is off grid.

20 angelie thune { 12.05.11 at 4:55 pm }

This is a super article and I really enjoyed reading all the comments.. my family is in the same situation.. we paid cash for everything : land, septic, and an awesome well (20gpm) .. and solar- and then learned that there is no help for us off grid.. and it would cost 80k to bring power to our property! yea- that’s not going to happen. So- we are now scratching our heads thinking of building a cob home.. but even that costs some $$$! I keep looking for lender/finance info for off grid- if I something, I’ll be sure to share.

21 Leslie Black { 06.20.12 at 10:49 pm }

Me too! Anybody find a lender? Trying to build, have the well and septic, planning on solar but the damned bank won’t even call me back and I have super credit and a long history with them.

22 Noogie { 02.16.13 at 1:16 pm }

The financing problems are primarily due to resale OF THE LOAN, (95+%) of loans are not carried by your lender, but are repackaged and sold to the Govt., or investors. Strict guidelines dictate what they will risk, and what they won’t. Resale of your off-grid home would be better if loans were available, but since you need so much cash to purchase them, you reduce the # of potential buyers. I wouldn’t look for this to change anytime soon, as we are not in an energy crisis as people would have you believe.

23 ffelix { 03.05.13 at 11:41 am }

Hm. Didn’t realize I was in this boat until this week. Thought we were going to do an easy refi to pull cash out of our off-the-grid house, but got a very rude awakening from a lender (USAA) who has written three previous notes on this property. Apparently, the rules have changed.

We originally built the house ourselves in 1994, paying cash because a loan was impossible. Once we had the house completed, however, it served as a comp for others in the area and there was no issue with financing it repeatedly over the years. Maybe because it’s not an exotic dump. You wouldn’t know it’s solar and well water unless someone told you.

We are off the grid by proclivity and because running utilities would involve trenching through rock for two miles: we were quoted $2.4-million to get a hard phone line 15 years ago.

This is really an unfortunate situation, and I’d like to suggest that everyone, I mean everyone, visit their congressional reps. This is how things get changed–if they aren’t getting visits, they can’t champion your issue. It’s the only way things will change.

24 Kristen { 04.03.13 at 8:55 pm }

Hi, I am just wondering if anyone has found any updates since this article was written? We are thinking about purchasing an offgrid home but I am worried about never being able to sell it or use the equity if we had to. We were quoted $87,700 to connect it to the grid, the sales price is only $116k. Is it worth it to take the risk and go solar, if nothing has changed since 2009?

25 Jen { 05.14.13 at 4:49 pm }

I also am considering purchasing an off the grid home. I have been running into lender financing issues as well. Has anything changed since 2009???

26 Pam { 08.15.13 at 1:58 am }

So, has anyone come up with a strategy for financing off grid properties?
It’s bizarre that these properties that are (IMHO) way more valuable than the crap boxes they sell in town, yet nobody will loan on them.
A word of advice: I have a friend that built a straw bale house and all her energy is from her solar panels. BUT, she’s connected to the power company. Once a year they send her a check for the unused energy they collect from her, but she doesn’t use. It’s a great system if you have that option.

does anybody know about the USDA rural loan program? Have they stopped loaning on off grid properties?

27 Nick Rosen { 08.15.13 at 3:29 am }

Pam – it might be a good idea to ask this question on the off-grid forum – thanks for th comment

28 Dave { 08.20.13 at 2:27 pm }

Same problem here in upstate NY.

Freddie and Fannie will not underwrite any off-grid home.
The actually documentation we received from Freddie Mac stated “IF IN ADDITION TO THE UNIQUE UTILITIES, THE SUBJECT PROPERTY IS ON THE GRID, WE ARE GOOD.”
No mention of the house actually being physically connected. Only the property.

So the possible solution (in our situation) is to bring power to the “property” and not to the actually house. A temporary service pole with a meter, a panel box and a couple of outlets is built 25 feet from the utility pole on road. The electrician signs off on temp set-up and grid power is connected. This is how it is done for new construction. And if the power co. asks, tell them you plan to build a garage at that location. Put some stakes in the ground if it looks more legitimate.
We may have to attempt this if we’re denied one more time from another lender.
If it works, we’ll have the power co. remove service from the property after a few months.

The other option is to lie to the appraiser if they bother to ask if you’re connected to the grid. I really wish I did. “Oh those panels on the roof, they were expensive and we never see a dime from the utility company.”
When people decide to be off-grid for the sake of making a positive difference and/or being independent, I consider the lie justified.

I’ll let everyone know in the next few weeks how everything pans out.
Until then, good luck out there…

29 Martine { 09.16.13 at 5:13 pm }

…aaaand same here in Ontario, Canada.
I need help. My credit is fine and it’s a relatively small amount in my opinion…where else can you get a cute little home on 11 acres for $71,000?…but it’s off-grid and the banks don’t even know what that means…all they know is that the resale value might not be adequate so they wont even look at it…I’m trying to do the right thing, to live responsibly and I stand to loose it all.
Any help in Canada?

30 Kristine Nigl { 01.24.14 at 8:51 am }

I have had my eye on a home that has been on the market for 2 years now – waiting until I had the money down and the timing was right and hoping it would still be there. It is located about 1/2 an hour outside of a reasonably sized city in Colorado. I just found out why it is still on the market it’s cash or convention only and instead of the standard 20% down lenders require 50% down. I feel for the seller, and I am disappointed as well because it appears to be the perfect place for me. I would be interested in starting a petition on change.org, but I am just beginning to find out about this issue, does anyone more familiar have an idea about who would be best to direct such a petition to? An individual lender would likely not do much good, I would think a government official, any suggestions?

31 Gene { 03.23.14 at 6:52 pm }

Irm , Maybe you don’t get it… I had to pay off my Escrow on my off the grid home. I wasn’t planing on being hurt on the job and obtained lots of medical bills. Not to mention all the other bills that couldn’t get paid all because I also couldn’t get a loan. on the home and land. Programs need to be available for any person who lives off the Grid. To Bring power to my home would cost 1.5 Million dollars. My Home and land might be worth 100,000.00. So how does that work? So Is bankruptcy the only option to destroy the rest of any life? I had good credit until they would not loan me money on a house and land I have paid off. Resolve! There isn’t any at this time. Personal loans work if you have good credit and your able to work. Well… at least I don’t have a Mortgage Payment and bankruptcy did take care of my other debts..by the way the Homestead act works really Good!!!

32 Gene { 03.23.14 at 7:01 pm }

Forgive me but my Vacation Home has become my permanent Home. The problem still exists when my home has to be sold.

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