Remortgage for Solar Panels

Why Install Solar Panels?

Solar panels convert sunlight into electricity that you can use in your home, store in a battery for later use or export to the national grid. Even in the UK's climate, solar panels generate meaningful amounts of electricity throughout the year, with peak production during the longer daylight hours of spring and summer.

Reduce your electricity bills: A typical 4kW solar panel system can generate between 3,000 and 4,000 kilowatt-hours (kWh) of electricity per year, depending on your location and the orientation of your roof. By using this electricity directly in your home rather than buying it from the grid, you can make substantial savings on your energy bills.

Protection against rising energy costs: Once installed, solar panels generate electricity for free for their entire lifespan, which is typically 25 to 30 years or more. As grid electricity prices continue to rise, the value of the electricity you generate increases over time, improving the financial return on your investment year after year.

Earn from surplus electricity: Under the Smart Export Guarantee (SEG), energy suppliers must offer you a tariff for surplus electricity you export to the grid. While the payment rates are modest, they provide an additional income stream that contributes to the overall return on your investment.

Environmental benefits: Solar panels are a clean, renewable energy source that produces no carbon emissions during operation. A typical home installation can save over a tonne of carbon dioxide per year compared to using grid electricity alone.

Increase your property value: Homes with solar panels are increasingly attractive to buyers, who recognise the benefit of lower energy bills. Solar panels can improve your EPC rating, which is becoming an important factor in property valuations and mortgage product availability.

The combination of these benefits makes solar panels one of the most compelling home improvements available to UK homeowners, with the potential for both immediate savings and long-term financial and environmental returns.

How Much Do Solar Panels Cost?

The cost of solar panel systems has fallen dramatically over the past decade, making them accessible to a much wider range of homeowners. However, the total cost still represents a significant investment, which is why many people choose to fund installation through remortgaging.

System sizes and costs: Solar panel systems are measured in kilowatts peak (kWp), which represents their maximum output under ideal conditions. The most common system sizes for UK homes are:

• 3kWp system (approximately 8-10 panels) — typically costs £4,000 to £6,000
• 4kWp system (approximately 10-12 panels) — typically costs £5,000 to £8,000
• 5kWp system (approximately 13-15 panels) — typically costs £6,500 to £9,500
• 6kWp system (approximately 16-18 panels) — typically costs £7,500 to £11,000

These prices include supply, installation, scaffolding and VAT. The exact cost depends on the panel brand and type, the inverter specification, the complexity of your roof, scaffolding requirements and your location.

Battery storage: Adding a battery storage system allows you to store surplus electricity generated during the day for use in the evening or overnight. Battery systems typically cost between £2,500 and £6,000, depending on capacity. A typical home battery stores 5-13 kWh of electricity. While adding a battery increases the upfront cost, it significantly increases the proportion of solar electricity you can use yourself, improving your overall savings.

Additional costs: You may also need to budget for an upgraded consumer unit (fuse board) if yours is outdated, bird proofing to prevent nesting under panels, and monitoring equipment to track your system's performance.

When obtaining quotes, always ensure they are from MCS-certified installers and that the quoted price includes all necessary equipment, installation, scaffolding, connection to the grid and commissioning.

Financial Returns and Payback Periods

Understanding the financial return from solar panels helps you assess whether remortgaging to fund the installation makes sound financial sense. The returns come from three sources: savings on electricity bills, income from the Smart Export Guarantee, and the increase in your property's value.

Electricity bill savings: The amount you save depends on how much of your solar electricity you use directly rather than exporting it. If you use 50% of the electricity generated by a 4kWp system and buy the remainder from the grid, your annual saving could be in the region of £400 to £600 at current electricity prices. With a battery, you might use 70-80% of your generation, increasing savings to £500 to £800 per year.

Smart Export Guarantee income: For surplus electricity exported to the grid, SEG tariffs currently range from around 3p to 15p per kWh, depending on the supplier and tariff type. Annual SEG income for a typical 4kWp system might be £50 to £200, depending on how much you export.

Total annual benefit: Combining bill savings and SEG income, a 4kWp system with battery storage might deliver total annual benefits of £600 to £1,000. At current energy prices, this translates to a simple payback period of around seven to twelve years, with the system continuing to generate free electricity for another 15 to 20 years beyond that.

Impact of energy price changes: If electricity prices rise, the value of each unit of solar electricity you generate increases proportionally. Conversely, if prices fall, the payback period extends. The long-term trend in UK electricity prices has been upward, which works in favour of solar panel owners.

Comparison with remortgage costs: If you remortgage to fund a £10,000 solar panel and battery installation, the additional mortgage interest might cost £300 to £500 per year, depending on the interest rate and term. With annual benefits of £600 to £1,000, the installation can be cash-flow positive from year one, meaning you save more on energy than you pay in additional mortgage interest.

Remortgaging to Fund Solar Panel Installation

The process of remortgaging to raise funds for solar panels follows the standard remortgage process with capital raising. Here is how it works and what to expect.

Check your equity position: You need sufficient equity in your property to borrow the additional amount required for solar panels. Most lenders allow borrowing up to 85-90% of your property's value. If your home is worth £300,000 and you owe £180,000, you have £120,000 in equity and could potentially release a significant sum.

Speak to a mortgage adviser: An FCA-regulated, whole-of-market adviser can search for the best remortgage deals and advise on whether a green mortgage product might be suitable. Some lenders offer preferential terms specifically for borrowers investing in renewable energy or energy efficiency improvements.

Lender attitudes to solar panels: Most mainstream lenders are comfortable with solar panels on residential properties, provided they are owned outright by the homeowner rather than leased or subject to a power purchase agreement (PPA). If you are buying the panels outright through remortgaging, this is generally straightforward. Leased panels can cause complications with some lenders, so outright ownership is the simplest approach.

Timing your remortgage: The remortgage process typically takes four to eight weeks. If you have already obtained quotes for your solar installation, you can coordinate the timing so that funds are available when you need them. If your current mortgage deal is coming to an end soon, you can combine the switch to a new deal with the capital raising in a single transaction.

Application requirements: You will need standard mortgage application documents including proof of income, bank statements and details of your financial commitments. You may also need to provide quotes or details of the planned solar installation to demonstrate the purpose of the additional borrowing.

The additional monthly mortgage cost for a £10,000 borrowing over a 25-year term might be around £40 to £60 per month, depending on the interest rate. When set against the monthly energy savings from solar panels, many homeowners find the net cost is very modest or even favourable.

Choosing the Right Solar Panel System

Selecting the right solar panel system for your home involves several considerations, from roof suitability to panel type and whether to include battery storage.

Roof assessment: Solar panels perform best on south-facing roofs with a pitch of around 30-40 degrees and no significant shading from trees, buildings or other obstructions. East and west-facing roofs also work well, though they generate slightly less electricity overall but spread generation more evenly across the day. North-facing roofs are generally unsuitable for solar panels.

Panel types: Monocrystalline panels are the most efficient and most commonly used for residential installations. They offer the best performance per square metre, which is important when roof space is limited. Polycrystalline panels are cheaper but slightly less efficient. The choice depends on your budget and available roof area.

Inverter options: The inverter converts the direct current (DC) electricity produced by your panels into alternating current (AC) for use in your home. String inverters are the most common and cost-effective for straightforward installations. Microinverters, fitted to each panel individually, offer better performance if your roof is partially shaded or has panels on multiple orientations.

Battery storage: Adding battery storage maximises the benefit of your solar panels by allowing you to use more of the electricity you generate. Without a battery, you typically use only 30-50% of your solar generation directly, with the rest exported to the grid at a relatively low price. With a battery, self-consumption can increase to 70-80%, significantly improving your financial return.

System monitoring: Modern solar systems come with monitoring apps that let you track generation, consumption and export in real time. This helps you adjust your energy use to maximise the benefit from your solar panels, for example by running appliances like washing machines and dishwashers during peak generation periods.

A reputable MCS-certified installer will carry out a detailed assessment of your property and recommend a system tailored to your roof, energy consumption patterns and budget. Always obtain at least three quotes and compare them on a like-for-like basis, including equipment specifications, warranties and after-sales support.

Practical Considerations and Regulations

Before proceeding with a solar panel installation, there are several practical and regulatory matters to address.

Planning permission: Solar panels on domestic properties in England generally fall under permitted development rights and do not require planning permission, provided they do not protrude more than 200mm from the roof surface and are not installed on a wall or roof facing a highway on a listed building or in a conservation area. In Scotland, Wales and Northern Ireland, the rules differ slightly, so check with your local planning authority.

Building regulations: Solar panel installations must comply with building regulations, but this is typically handled by your MCS-certified installer as part of the installation process. They will submit the necessary notifications and ensure compliance with electrical safety requirements.

DNO notification: Your installer must notify your distribution network operator (DNO) before connecting a solar panel system to the grid. This is a standard part of the installation process and is usually handled by your installer.

Roof condition: Before installing solar panels, it is worth assessing the condition of your roof. Panels are designed to last 25 years or more, so if your roof needs repairs or replacement in the near future, it is better to address this before the panels are fitted. Removing and refitting panels to carry out roof work later is an additional cost.

Insurance: Notify your home insurance provider that you have installed solar panels, as they add value to your property and need to be covered against damage, theft and third-party liability. Most insurers cover solar panels without additional charge, but some may adjust your premium.

Warranties and maintenance: Solar panels require very little maintenance, but it is important to check the warranty terms for both the panels and the inverter. Panel manufacturers typically offer 25-year performance warranties, while inverter warranties are usually 10-12 years. Some inverters may need replacing once during the lifetime of the panels.

MCS certification: Using an MCS-certified installer is essential if you want to be eligible for the Smart Export Guarantee and ensures your installation meets recognised quality and safety standards. MCS certification also gives you access to an independent complaints process if anything goes wrong.