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If you live in an apartment block and you've heard about world-first technology, you'll know that solar can save you heaps off your bills, reduce your carbon footprint and increase your property value. It's a no-brainer really.
You and your neighbours might be wondering how to fund shared rooftop solar for your apartment complex.
There are generous government subsidies available across the country, such as Victoria's $2,800 per apartment grant or the ACT's $100,000 grant per apartment building, there might be some left over to pay.
So we've laid our some information on strata loans below.
How Strata Funding Works
A strata loan is an unsecured loan directly to the owners corporation; there are no mortgages, banker’s liens, charges or caveats involved.
Owners corporations and body corporates can fund any capital works (such as building repairs or additions like solar) with:
- Regular levies that are regular payments by apartment owners into a sinking or maintenance fund
- Special levies for once-off large costs
- Borrowing
- A mix of any or all of the above
Everyone has different interests depending on their individual financial situations so the discussion around how to fund building updates can be crucial to passing them at a vote.
A decent strata loan should allow the owners corporation to drawdown as many times as they like without penalty to ensure you only pay for what you use, when you use it.
Strata Loan Interest Rates
The lowest interest rate we know of at the time of writing is Lannock's Strata Finance loan, which is around 10%. They tend to be high because these loans are unsecured and therefore carry a higher risk for the lender.
Because of this, it may be beneficial to pay for some of the loan upfront (or with government grants) to reduce the total owing amount, and therefore the interest.
The good news is, the cost of the interest is very likely to be offset by the significant reduction in your energy bills! Most people pay 30-60% less using a SolShare shared rooftop solar system, depending on their usage.
Pros and Cons of Strata Loans
Pros
- It might be your only way to get solar - unless you're lucky enough that all your neighbours are flush with cash, or you have a sinking fund you haven't dipped into in a while, it may be difficult to get everyone to agree to pay upfront. A loan offers everyone flexibility.
- Simplicity - the loan is with the owners corporation, which means that there is no requirement for individuals to refinance existing mortgages, provide personal financial records or guarantees.
- Speed - Quick funding approval and access enables projects to commence and be completed without delay - that means you don't waste another month paying sky-high electricity bills.
- They can be relatively cost efficient - interest is only charged on the current outstanding loan balance, rather than the total loan amount, ensuring that you are only paying for what you use, when you need it.
Cons
- Interest rates - as mentioned above, you will be paying interest, although this will likely be offset by your electricity bill savings.
- Indecision - the loan amount can be difficult to decide upon in owners corporations. Usually however, residents choose to opt to cover most of the amount of the solar system for simplicity's sake.
More questions? You can download Lannock's FAQs document here for more info.
We recommend speaking to a strata finance provider to find out your options. They can normally pay your building a visit and settle any questions you have.