Today I’ll be answering some questions about HERO and PACE loans and what they’re for.
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As a follow-up to last week’s video, I want to address some questions I’ve received about HERO and PACE loans, and what they can be used for.
HERO (Home Energy Renovation Opportunity) and PACE (Property Assessed Clean Energy) loans are really intended for energy-efficient upgrades. This includes things like insulation, window upgrades, solar panels, and, sometimes, heating and air conditioning.
Each company is going to be different, but if you look up HERO or PACE loans, you’ll find all sorts of companies that will give you more specifics.
The loans are repaid by attaching them onto your tax bill. If your tax bill is, say, $3,000 and you do some upgrades, then your tax bill is going to increase on a yearly or monthly basis. It may also be impounded in your mortgage payments.
HERO and PACE loans are really intended for energy-efficient upgrades.
Another option you have is to do a cash-out refinance of your home. Interest rates have been rising, so if you have a really great interest rate (anything under 4%), you may not want to look at that as an option because a cash-out refinance may come at a higher rate, costing you more in the long run.
You can also do a home equity line of credit (HELOC). This leaves your initial mortgage intact and allows you to pull money from the home and repay it as quickly as you can. That also generally comes at a higher rate than your first loan because it’s in a second position; however, you may still be able to get a decent rate with the HELOC.
The good news about a cash-out refinance or a HELOC is if you are doing significant improvements to your home, you may still be able to write off the mortgage interest. However, if you’re pulling the money out just to do debt consolidation or something similar, you cannot write off the mortgage interest.
If you have any questions or would like more specific details, please feel free to reach out to us. We’d be glad to provide you with answers as well as referrals to some great lenders.
