Should You Add Solar To Your Home Loan Or Refinance Instead?

You can usually add solar panels to your home loan either by topping up your existing mortgage or by refinancing to a new lender and including the solar cost in the new loan. The smarter choice comes down to: 1) how competitive your current rate is, 2) how much equity you have, and 3) whether refinancing costs are clearly outweighed by interest and power-bill savings within a few years.

Here’s how to decide, with numbers you can check this week.

Compare top-up versus refinance options before adding solar to your home loan.

Option 1: Top up your current home loan for solar

A home loan top-up (equity release) means your existing lender increases your limit to cover the solar system and/or batteries.

In practice, you might:

• Add $15,000–$40,000 to your current loan; and
• Keep total lending at or under 80% LVR to avoid LMI where possible.

When a top-up is usually better

A top-up tends to win when:

1. Your current rate is still sharp (within ~0.30–0.50% of strong new-customer offers).
2. Refinance fees would eat most of the benefit.
3. You value speed and low admin – same lender, same direct debit, same portal.

If your rate is pretty competitive already (or you’ve just negotiated a repricing), topping up avoids discharge, new application and government fees.

Structure the solar cost in a separate split

Avoid stretching a 15–20 year asset over a 30-year mortgage.

Instead, ask your lender or broker to:

• Set up a separate loan split for the solar and batteries; and
• Put that split on a 5–10 year principal-and-interest term.

Existing research across this content hub shows that keeping solar in a separate 5–10 year split can more than halve total interest on that component versus blending it into a 25–30 year loan, even at the same rate.

Example (indicative only):

• $25,000 solar top-up at 6.5% p.a.
• 30-year term: repayment ≈ $158/month; total interest ≈ $32,800.
• 7-year term: repayment ≈ $372/month; total interest ≈ $6,200.

Same rate, massively different interest. The trade-off is higher monthly repayments, so you must check cashflow and mortgage-stress risk.

If you’re also a first-home buyer, it’s worth planning the structure up-front so your initial purchase and later solar plans don’t compete for your limited borrowing power – see /insights/first-home-buyer-grants-schemes-solar-funding.

Option 2: Refinance and add solar at the same time

Refinancing means moving your whole loan to a new lender, then including the solar cost in the new facility.

This option can make sense if:

• You’re paying a clearly uncompetitive rate now; and/or
• You want better features (offset, extra splits, more flexible policy).

The key breakeven check

Before refinancing mainly to add solar, you need to see if:

Interest saved on the whole loan + power-bill savings − refinance costs − extra interest on the solar portion > $0 within a timeframe you’re comfortable with (often 3–5 years).

You’ll typically compare:

• Current loan: balance, rate, remaining term, monthly repayment.
• Proposed refinance: new balance (including solar), rate, term, monthly repayment.
• One-off costs: discharge fee, new application fee, government fees, possible valuation costs.

We walk through this in more depth in /insights/refinance-mortgage-add-solar-batteries-decision-guide.

When refinancing is likely worth it

Refinancing is more likely to win when:

1. Your current rate is 0.60–1.00%+ above market for a similar borrower.
2. Your total loan is large (for example $700k+), so a rate cut saves real money.
3. You can keep your LVR at or under 80% after adding solar.

Indicatively, a 0.75% rate drop on a $800,000, 25-year loan can save roughly $4,000–$5,000 in interest in the first year alone. That can easily outweigh $1,000–$1,500 in switching costs.

Again, keep the solar portion in a shorter, dedicated split inside the new loan so it doesn’t become long-term drag.