Pay off a chunk of mortgage or invest in Solar PV?

keith969

Hi Folks,

I recently came into some money which is currently sitting in a Lloyds TSB account generating peanuts in interest, so I want to decide what to do with it. I have 4 options as far as I can see:

1) Pay off a chunk of my mortgage - I could pay up to half of it off, I need to think about remortgaging anyhow as the 2 year discounted mortgage I have with HSBC is up in a month's time and I will be on their SVR. I have 10 years remaining on the mortgage which ends when I retire.

2) Put part of it into investing in Solar PV. With the current feedin tariff it should pay for itself in 6 years and generate a return of 7% AER according to the calculator here: http://www.navitron.org.uk/page.php?id=139&catId=65

3) Find a higher interest paying option e.g. a 5 year bond (keeping a bit in a easy access account for emergencies)?

4) Do a bit of all of these to spread the risk.

Any thoughts? I'm interested in the solar PV thing as I have a nice south facing 40 degree roof that could support a 3.96kW system.

- Keith

thenudeone

keith969 wrote: »

2) Put part of it into investing in Solar PV. With the current feedin tariff it should pay for itself in 6 years and generate a return of 7% AER according to the calculator here: http://www.navitron.org.uk/page.php?id=139&catId=65

I haven't looked at the calculator but if something pays for itself in 6 years it must have a higher rate of return than 7%. That's just mathematics.

Solar PV in a good location (due south, large unshaded roof, 30-40 deg tilt) should provide around 10-12% tax free return and would need 8-10 years to pay for itself.
However unlike a bond there is no way to liquidate the investment and it's also difficult to predict whether you will recover the investment by increasing the sale value of the house.
If you are planning to be in the house for at least a decade I would definitely go for solar (I have) as it trumps everything else in terms of after-tax return (even overpaying your mortgage), and in 10 years they should be so common that any negative feelings about buying a house with panels should have disappeared.

There are loads of threads on this subject in the green and ethical forum. have a look there for more ideas.

Lokolo

1) Depends on the rate.

2) It's all well and good getting a return, but you lose your capital. You would have to make enough to get your capital back PLUS a return.

3) Good idea potentially.

Procrastinator333

I think IF you are intending to stay in your current property for the next 10+ years, then go for the solar panels (as long as they are tied to the feed in tarrifs). Imo it is a complete no brainer so long as you are staying there. The guaranteed feed in tariff will rise with RPI (or is it CPI) will pay for the thing quickly and then give you a decent profit. On top of that you get to keep the electricity, not a huge amount at present, but as prices rise over the next 5, 10, 15 years, that will become even more valuable.

keith969

Good point about staying or not, I need to consider that too, although I'm fairly confident I will be here for the next 10 years (or if not, letting it out).

I guess I'm just nervous about spending a sizeable amount on something that seems too good to be true, hence the alarm bells.

edinburgher

but as prices rise over the next 5, 10, 15 years, that will become even more valuable.

True, but the efficiency of the system will start to degrade at some point as well - sure 25 years is bandied around as an estimated figure for the life of solar panels? So you'll need to replace it at some point if you're planning on living for at least 25 years (or not, if the rewards have been as good as you hope!)

Procrastinator333

edinburgher wrote: »

True, but the efficiency of the system will start to degrade at some point as well - sure 25 years is bandied around as an estimated figure for the life of solar panels? So you'll need to replace it at some point if you're planning on living for at least 25 years (or not, if the rewards have been as good as you hope!)

IMO, at present, solar panels are all about the feed in tariffs and guaranteed rpi increases. The free elec is just a bonus. I just don't see how any other investment comes close. It should almost be advertised as a retirement annuity. And the crazy thing is all of us not on the feed in tariffs are paying for those that are. But hey ho, get it if you can.

Hungerdunger

Procrastinator333 wrote: »

The guaranteed feed in tariff will rise with RPI (or is it CPI)

It's RPI

Procrastinator333 wrote: »

On top of that you get to keep the electricity

Or to be more precise, you get free electricity while the system is generating more than you are using. But you will still have to pay for all your night-time usage and any during the day which exceeds the amount being produced. (Although, having said that, until you are put on a smart meter, you may find your old one runs backwards during generation, which will reduce your bills)

lee1985

Buy several thousand lottery tickets and hope that you hit the big one!

alanq

edinburgher wrote: »

True, but the efficiency of the system will start to degrade at some point as well - sure 25 years is bandied around as an estimated figure for the life of solar panels? So you'll need to replace it at some point if you're planning on living for at least 25 years (or not, if the rewards have been as good as you hope!)

Inverters won't last for 25 years. I have seen 10 years mentioned. They cost £1000 to replace.

Solar panel firms give consumers poor advice, says Which? http://www.which.co.uk/news/2011/06/solar-panel-firms-give-consumers-poor-advice-says-which--256929/

ZoshJosh

I read somewhere that solar panels were guaranteed. Does anyone know for how long? And are some better than others? (Just want to get my questions for the companies ready!!)