Mortgage Overpayments or Solar Panels

jraclarke

Hi everyone,

I've managed to build up some savings and I was wondering what would be the best use for them. I currently have a 4% mortgage and I am able to overpay by 10% so that is an option.
I've also looked into solar panel installation and I would be able to get this done for £4,200 - the return on this would be approximately £550/year.

My question is, is it better to overpay the mortgage using this £4,200 or to invest in the solar panels. My quick (and possibly wrong calculation) would be that I'd be saving £200/year on the mortgage and £550 with the panels.

Is this maths valid from day 1, or does it only become valid when the solar panels have paid for themselves? It just seems like the solar provides the best return to me.

Thanks in advance and happy saving!

J

TrickyDicky101

If the £550 represents the gross cash receipts from the FIT (ignoring electricity saving for now) then you need to also factor in the capital outlay which is £4.2k. This is an amount you would have paid off your mortgage, but if you buy the panels, it is still owing on the mortgage and thus still needs to be repaid from the cash received.

£550 for 20 years is £11k less the £4.2k and you are talking just under £7k in total over the 20 years. Add in the interest on the £4.2k of mortgage debt you will pay and the economics will be very close.

whysoserious13

£4200 for solar panels seems high.

Where are you located if you dont mind me asking?

jraclarke

Thanks Tricky, that makes a lot more sense now. Using the mortgage overpayment calculator shows there really isn't a lot in it. I've decided to overpay the mortgage as there is more flexibility to move house should I need to!

Thanks again

J

jraclarke

Whyso, this was a rough figure. IKEA actually do solar panel installation (through a local contracted company) and this was the provisional quote. It could have cost more or less if they came and surveyed.
I'm in Hampshire.

whysoserious13

Only asking as a local contact of mine can get them installed for free, no condition attached.
Wrong part of country though.

dimbo61

nothing in life is free ! So therefore the Free solar panels means you are agreeing to Rent out your roof for the next 20/25 years.
Lots of posts on here about problems people are having when they try to sell the property with the solar panels attached to the roof.
Right to overpay as Interest rates may not be 0.5% or 3/4/5/6% for the next 5/10/15 years.

welshwizard1927

We couldn't get a mortgage on a property with leased solar panels, and as far as I'm aware, nobody else could. Two years later and the property is still on the market. I'd avoid at all costs...