Off- the grid - impact on loan approval

Hi all

We currently have a solar and battery set-up, with grid back-up (very minimal power bills) and am thinking about going totally off the grid. Talking with someone, they said that banks (and motgage insurers) give off-grid systems a higher risk rating when assessing a new loan application.

Interested in your comments if you have bought a house with a full off-grid system, or if you have any insights to how banks treat off-grid systems when assessing a new loan application.

Cheers,

 

Mine is 6 acres, tar road (2 minutes from a growing village), NBN, excellent mobile coverage.

'twas asking in general. Next place (which will go fully off-grid) will be further out, larger land. Understand several factors in assessment, was wondering if there have been any specific comments about asseessments of solar/off-grid systems.

 

I fail to see how any lender would justify (or consider) devaluing a property for being "off grid" when a grid connection is AVAILABLE (or previously connected) !

It would/should be treated the same as a vacant property where no current electricity connection (customer) exists.

 

Absolutely, no reason was given when I was told about off-grid setups and the loan approval process but it could come down to the security of the electricity supply. Through the grid, if anything happens, the elecricity provider will fix - guaranteeing supply. With off the grid systems, it is up to the occupier to ensure it works - moving the risk to essentially an 'unknown quantity'.

 

As an owner occupied PPOR the savings would surely offset any maintenance costs
(Being an established off grid system already paid for)

I wouldn't ever consider an off grid system for an IP

I filled out a monthly/yearly outgoings form a few years back.....
The bank all but refused, they said I had lied (fraudulent) in my application stating my electricity costs were less than $300pa

So I sent them a Google Earth screen shot of my roof covered in Solar PV systems

The loan was quickly approved

 

Can you just close your electric account, but leave all the infrastructure in place so in the future someone can just reconnect with a phone call?

 

I would have the off-grid installation set up and running with a generator back-up (so I would have closed my electric account way before the property sale). The connection back to the grid would still be there but not be active (would require an electrician and/or electricity company to reconnect).

The question is do lenders see an off the grid solar system with no active connection to the grid as a lending risk.

From what I'm reading above, it would come down the the LVR required, but I would hazard a guess that it would raise the lending risks as it is currently 'unusual/not the norm' and not able to be managed by a recognised company (ie electricity distributor).

 

i like the concept of being off the grid, but have never seen a client in that situation. It would probably come down to comments by a valuer - but how would they know it is off the grid unless you mention it?

 

Im in pretty much the exact situation that youre describing and my bank (choicelend) would only go to 70% LVR as a result. I don't have power connected to the block; though it goes past the front boundary.

 

If the power was once connected and you moved from the grid to an off-grid system, the valuer would need to be on the ball to ask what the battery bank was about and ask probing questions about last elctricity bill etc. I assume as part of the conveyancing checks, there isn't a check for the last electricity bill.


@Nicco , did you buy vacant land and there's no power onto the block, or an established house with no power from the front boundary?
If it's a vacant block then as part of the build process I assume bringing power into the block to the house would be the owner's responsibility? then the final loan on the constructed house could be re-evaluated by the bank.
Thanks for your comment.

 

The land I bought was vacant, and at the time I got an 80% LVR loan. I then built a 2 bed house on it with an offgrid solar system using cash. I went to refinance to pull the equity and that was when the bank advised they'd only go to 70% LVR. I saw the valuation report and the fact that it was offgrid was identified as a risk factor. My broker said that that was why the bank would only go to 70% LVR.

 

Interesting, thanks @Nicco . Possibly no powerline from the front boundry highlighted this to them. If you bought an established property that had the power connected, then went off-grid, it would be interesting to see if and how they picked it up.

Cheers,

 

Yes! My Adjacent neighbour has since got power connected to his place so the powerline now crosses the road to my property and has the transformer etc. You could easily think my property is connected now! Next valuation, I wont volunteer that the house is off grid. I would be surprised if they pick it up without my volunteering it.

 

Thanks @Nicco. It would be interesting how the valuers and banks treat the property with that infrastructure. It would also be interesting to talk to the valuer about what they found and impacts on loan (see if they specifically raise the electricity situation and their/the bank's thoughts on it). All the best with the next valuation.

 

It's been years since I saw a scenario a bit, but this question often came up about 10-15 years ago, almost every lender would mention it in their training for some reason. The general comment was lenders require electricity infrastructure to be available to the boundary of the property.

These days, it never comes up in any discussion. In this situation I simply wouldn't tell the valuer anything. Let them assume it's connected. It's getting more common for houses to have solar panels anyway.

 

Also, underground power is far more common these days

I also fail to understand why and how being "off grid" can/should affect the lvr or loan conditions IF the grid power is "available"

It'd be like de valuing a house by saying there is no actual garage space/parking because it is full of moving boxes and a beer fridge

 

I agree. Utilities would come up a lot over a decade ago, today it never comes up. Probably not an issue, but why draw attention to it in today's conservative lending environment.