Is borrowing to save $ on heating wise?

piedmontMarch 27, 2006

I've been wondering if this is wise. If I spend $7,000 and convert my current heating system to Solar is that a wise investment? It will take me 3 years to pay it off and they'll have accued $600 in interest but I've had a Solar analyses done of my house Solar should cut down my heating bill by 60%, and my hot water bill by 90% for a savings of around $1,300/year. If oil costs more next year (most likely) it will save more than that. I've also looked at incentives, etc.

I'm leaning it's a wise investment to borrow money to save money IF you currently have no debt on your credit cards AND you calculate how much interest will be accrued, AND the savings will justify the cost. Sort of like, it's better to charge up $1,000 for insulation on your credit card if it saves you $800/year in heating as the interest they can collect will not exceed your savings over the years you stay at the house. I plan on living in my house for 10 years and rent it afterward so it will continue to net me $.

Please no "My friend had solar in his house 30 years ago and the units clouded and were useless." The 80's were a time the industry got saturated with those without experience making their own home-made panels and installed them. There were countless cases of faulty panels or improper installations and those fly-by-night idiots nearly killed Solar's chance. Today, Solar panels are extreme quality, don't fog, made to last 25-30 years, and designed in a factory. In-laws have a Solar house built 25 years and the same solar panels and system, only needing one new pump so far still provide 95% of their heating/hot water needs. If theirs can last 25+ years, mine can last 25+ years.

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Sounds like a no-brainer to me. The only problem would be an unexpected early move, so if your job or life has a little uncertainty to it then you may not recoup the initial investment in energy savings. OTOH, you may be able to get it back upon selling the home. I'd look into returns from a selling standpoint, and if they work out, go for it.

I'm borrowing money to get an education so I can make much more money than was possible with my previous training, so obviously I may be a bit biased. But I do think investments like education and energy savings, plus saving a little bit of our good Earth, are well worth it.

    Bookmark   March 27, 2006 at 7:24PM
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I wonder about the math. 30 years ago was the seventies, not the eighties. Yet your inlaws had their system installed in 1981? Is that right? at a time when the industry was saturated, and yet they got a good one.

The only thing I'd do is look for more people who actually have them installed in your area, to see if the savings came to anywhere near what the analysis says "should" happen. You don't say whether your inlaws live near you, or not. In either case, *one* figure for comparison doesn't give you much to work with.

    Bookmark   March 28, 2006 at 8:44AM
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Definitely speak with more of that company's customers to find out what the experience was like and if their actual savings come close to what was quoted. Also, will you have (or need to have) an auxiliary system if it's either very cold or very cloudy for many days ("My page" says you live in Zone 5, which still frosts in the wintertime)? What will that system be? Will their be costs associated with keeping that system running?

If you're satisfied that the installation will be done properly, the numbers add up, and there is a good likelihood you'll be there long enough to repay the investment, then I would have no problem borrowing a reasonable amount of money to do that.

    Bookmark   March 28, 2006 at 8:53AM
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It was 30 years ago in the 70's and 80's the solar market was saturated with fly-by-nigthers taking advantage of incentives. You can read about it from Mother Earth newshere under the section SMART SOLAR SHOPPING. It also brought some gems and innovative technology as well, which my in-laws were one of the first to get an award winning Hybrid system. That link explains it and that company is the one who installed my in-laws solar back in the early 80's and still in business doing solar and radiant heating. That's who I'm going with.

I live in Zone 5, the in-laws who have had Solar since around 1981 live in a colder Zone 4 (Mid-North VT) and I've been hanging out for weekends at their solar house for the past 6 years. Their system is closed and glycol so it can't freeze. When I'm up there, this is what I see. When it's 40 outside, they engage the slab. They have to open windows during the day as the place warms up to 80's inside. I get up in the morning, the house is 75 or so and the windows start to slowly open again if the sun comes out. When it's 20+F they shut the windows and their house holds 73-80 through the night. When it gets cloudy their slab will maintain temps over 70 in their house for a couple days afterwhich they fire up the small wood stove until the sun comes out. For the past 6 years I've seen them heat their house with 20+ year old solar panels using 1/2 a cord of wood/year in mid-upper VT and more often than not I watch them opening windows. They like their solar, but don't brag about it. They pay $120/cord of wood so if you figure that they burn 1/2 cord per year and the solar pump uses my guess $15/month on average they heat their house and hot water for $240/year in mid-north VT.

I am not going to be able to get as much out of it as they will. My house is not built around Solar, theres is. I got to the 60% for heating and 90% hot water by the solar analyses. Someone actually went on top of my roof with I think it was called a Theolodite and spun it around marking the location of obstacles on a sun path chart for my location. They then showed me things like, in December that pine tree right there will block the sun hitting 2 of the panels until 10:30am etc. They deamed that I will receive 86% of the sun available. The sun chart being for my area. They then got the sun data for my area available freely from the government who records per month since the 60's how much sun hit a particular solar panel at a particular angle, in my area. Your area as well. You can see which months were cloudy in 1965 and which weren't in 1981, from that data they were able to average the sun by each month for the past 40 years, and come up with how many btu's the solar panels on average will give me for each month in my location compensating for loss. I then gave them my oil bills over the years and saw, that my house in Nov and Feb I will occasionally need so supplement the solar else my house will be low 60's, and December and January more often than not will need to help my solar. It will still be saving me on heat, but it will need a boost. However there should be enough for my hot water use nearly year round. That's how I got the 90% hot water and 60% heating, no opinions or people guessing it was all professionally done from a solar analysis.

In the end, I think it's a no brainer like meghane said. If I wait until I have the $, I'll have wasted at least $5,200 paying for oil on heating to save me $600 of interest. Or, I can purchase it on my credit card for $7000, and start saving $1,300/year+ on my fuel - $600 for interest. It's important that people don't think they can be like my in-laws, their house was built around solar first and foremost back in the early 80's. FYI Solar is a low energy form of heat and only applicable to well insulated and tight houses with radiant floor heating. If you want to do Solar with an old house, you need to insulate your walls, replace your windows, add insulation in your attic, air seal, insulate your floors, convert over to radiant floor heating, add insulation under the radiant floor heating, THEN you can think about adding solar panels. It's like a 3 cylinder engine, if your house is very efficient you'll get along just fine. If your house is like an old gas guzzling 8 cylinder Suburban you can't exactly get away with putting a 3 cylinder in it. I don't want to mislead, I have gone through most of the steps necessary for Solar which is why I can consider it.

    Bookmark   March 28, 2006 at 11:51AM
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I don't have any opinion on the solar issue, but wouldn't it be better to get a small loan from the bank instead of charging it to your credit card? Credit card interest rates are usually ridiculous.

    Bookmark   March 28, 2006 at 1:54PM
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Normally that is usually the case. I think there are also loans called "Green loans" which have a lower interest rate for those who want to make an environmental improvement to their property at a lower rate which this would fall into. But my credit card has offered me a check where I can "Take a vacation, do what I always wanted" and garuntees 2.99% interest for the amount I cash it for until it's paid off (I've used that offer from them in the past). I know the trick is, they hope I continue to charge on my credit card and they can keep compounding that higher interest amount until I pay off the lower interest. But, I'm not going to fall for it. If I purchase it on my normal 7.99% they'll collect around $1,600 in interest. The other option is to take a home equity loan, where I can claim any interest collected on my taxes.

Just found out the Federal Government is offering a tax credit this year for 30% of the installation of a solar water heating system with a max cap of $2000 you can claim, and that solar can not increase my property tax, nor can tax be collected on the purchase of said solar heating system. So, that means I'll pay $7,000 and get $2,000 back from the fed as it's a dollar-dollar credit not a deduction. I need to see what's going on as I'm sure you'll agree things are really sounding like they're too good to be true.

    Bookmark   March 28, 2006 at 2:38PM
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That's weird, it posted twice.

    Bookmark   March 28, 2006 at 2:39PM
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Some companies will actually deduct the federal/state credit from the cost of the system so that you do not have to worry about getting the money back and then paying off your loan. You just start out with a smaller loan and the company has to worry about getting the money from the government themselves.
I believe that the credit goes up a significant amount next year? I would double check this to make sure. You may be better off waiting a little bit. I remember that it is going to be capped at 4 or 5 grand soon, not 2 grand. Of course I was looking at a PV system, not a water heating system.
Also did you visit the alternative energy forum? they are pretty smart over there.
Heating is only going up in price, so that is something to consider also.
Also maybe you want to look into a home equity loan. They are usually cheaper also.

    Bookmark   March 28, 2006 at 5:07PM
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