What are the pros and cons of a pace loan?

January 19, 2024

It’s a fact, being environmentally friendly is important. Saving water and energy is good for the environment and can be of personal benefit by lower utility costs. Unfortunately, upgrading your home can be expensive. 

Whether you’re looking for drought- resistant landscaping, trying to upgrade your HVAC system, or installing a new roof or solar system (and anything energy or water efficient in between), these projects, while admirable and beneficial can put a pretty hefty hole in your wallet. Some people may not qualify, or may not want a traditional loan to help pay for these upgrades, this is where a PACE loan comes in. 

Pace loans have many advantages, but like any loan, it may not be for everyone. The pros of PACE financing are: 

  • Pace loans are easy to qualify for. 
  • No upfront costs. 
  • Pace loans can be transferred to the next owner.
  • Pace loans offer extended pay periods as long as 20 years. 
  • Lower payments
  • There are potential tax credits 
  • Interest payments are tax deduction. 

PACE stands for “Property Assessed Clean Energy”. A pace loan is repaid with the property tax, and as such – the assessment remains with the property and not with the borrower. Pace loans are approved, not on credit, but rather on property equity. This can be a blessing for those with challenged credit, and for those who do not want a traditional loan “showing up” on their credit reports. This can come with caveats though. 

  • Payments can be due in large payments with property taxes, rather than monthly. 
  • Interest rates are higher.
  • The PACE loan is a lien on the property.
  • Nonpayment can result in foreclosure. 
  • Can be a complicated loan structure. 
  • Some mortgage lenders my now allow PACE financing. 

Just because there are cons, does not mean a PACE loan is “bad”. As with any type of loan, it has pros and cons. Most who opt to go with a PACE loan are happy with their decision. Because a new roof is an energy efficient upgrade, a new roof can easily be financed with a PACE loan. If you’re interested in getting a new roof with a PACE loan, you’ll need to contact a roofing contractor who is pre-approved to work with PACE lenders. American Eagle Roofing is partnered with FortiFi to provide you with safe and secure PACE loans.