What are the costs of PACE financing?

Financing costs of a PACE project vary by program administration, lender and origination fees, and other third party costs such as energy audits, trustee fees, attorney opinion letters, and title insurance. Nominal interest rates have been decreasing over the past few years and can range in the 6% range for most projects depending on the term duration or useful life of the improvements. Similar to a commercial real estate loan, the interest rate has been typically calculated on a spread over the corresponding Treasury. A number of factors play into the spread calculation such as the quality of real estate asset (income, tenancy, market, etc.) and of the property owner to a lesser extent. One of the benefits of PACE is that the hurdles to qualify for a PACE loan are different than for conventional loans, because PACE loans are non-recourse and run with the land, and are based primarily on the property’s ability to make the real estate tax and PACE assessment payment.

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