When Mello Roos assessments first entered the picture over two decades ago, the real estate community cautioned homeowners about deducting the Mello Roos portion of tax payments on their tax returns. Everyone I have ever encountered did take those deductions, even though they are technically a very small portion of a bond payment. Those bond payments obviously include principal and amortize as well. Technically, the homeowner is getting a deduction on the principal reduction component of the payment, whereas that is not the case with a mortgage payment, where only the interest is tax deductable. I’m not aware of any negative consequences from declaring those deductions. Be advised, we are not offering tax advice, so be sure to consult your tax professional on this matter.
Another “advantage” presented by the contractors could be that the obligation or assessment stays with the property, so it can technically be transferred to the new owner. (However, there might be some serious issues with this assumption!) This aspect of the financing may appeal to homeowners who have an unclear time frame about how long they intend to own the home. If they are undecided about staying in the home long enough to recoup their investment in the project, this potential benefit might be tipping point that facilitates the sale, especially with solar panels which are so popular.
Again, PACE / HERO loans are primarily sold by home improvement contractors. In many of the cases my clients have been involved in, the sales process was initiated by a “door to door” solicitation, generating their interest to pursue a home improvement project. This tactic represents an “old school,” direct sales scenario, almost similar to the days of selling vacuum cleaners door to door to stay-at-home house wives. This practice certainly wouldn’t occur in a gated, million dollar home community, where solicitors can’t enter and buying decisions often occur without the help of a salesman and with thorough online research ahead of time.