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Person signing paperwork for PACE financing.
PACE financing can help you make important improvements to your commercial property.

PACE financing is an increasingly popular option for financing certain building features and upgrades. Property Assessed Clean Energy (PACE) financing is a type of financing offered in certain areas with the right legislation to allow property owners to invest in energy efficient upgrades without sacrificing cash flow for up front costs or high repayment costs for other types of loans. One thing many borrowers wonder about PACE is interest rates, like how they work, what they are, and whether interest payments are tax deductible. We’ll explore these common questions in this blog. 

Key Things to Know About Interest for PACE Financing

There are many things to know about PACE interest. Interest is essentially the cost of borrowing, paid back to the lender because of the risk they take for lending you the money. With PACE financing, the risk for the lender is much lower. This is because the repayments are a type of property assessment on your property tax bill. Therefore, repayment rates are much higher compared to many other loans. The result is that they can often offer much lower interest rates than other types of loans. 

PACE funding interest rates vary based on many factors. For instance, the lender, your property, and your creditworthiness. So, the only way to know what interest rate you can get for PACE loans is to talk to your lender about your specific circumstances. 

However, by and large interest for Property Assessed Clean Energy financing tends to be much lower, as it’s designed to give property owners an affordable way to make energy efficient upgrades to their buildings. For instance, typical interest rates for PACE financing fall between 5% and 7%. Compare that to mezzanine financing with interest rates often between 8% and 12%. 

In addition, interest payments on your PACE funding are often tax deductible. Therefore, you may be able to deduct part of your repayments for your PACE loans.

Advantages of PACE Funding

You might be wondering why you should consider PACE financing in the first place, beyond the low interest rates. There are actually many advantages of this type of financing for your property. Here are some of the many benefits of choosing PACE for your commercial property upgrades:

  • Long-Term Financing: PACE funding generally has a long loan term, up to 30 years in some cases. 
  • No Down Payment: Because PACE financing can cover 100% of soft and hard costs for your energy efficient project, there’s no down payment or up front costs. 
  • Loans Stay with the Property: If you sell your property, the loan automatically transfers to the new property owner. 

Therefore, there are many reasons to consider PACE financing for your property. 

Stonehill PACE – Top PACE Lender Nationwide

Our team at Stonehill PACE is a direct PACE lender offering creative financing solutions for a wide range of properties. We offer PACE solutions for hotels, multifamily properties, retail, offices, and other commercial property types. Our goal is to provide you with the PACE funding you need for success. Contact us today to learn more and get started.