The Quick Read: A PACE assessment is collected through your property tax bill and, in many states, ranks ahead of your first mortgage and any home equity line placed behind it, so it cuts the equity a new line can use and gets reviewed as its own title item. Bank statements only prove income, and they do not change lien order or leverage.
- Bank statements answer the income question. Title and combined leverage answer the collateral question.
- The unpaid PACE balance generally reduces the equity a lender will count, and it can add to the tax-bill cost in your ratios.
- Lender treatment varies, so expect a payoff request at closing, a lower line, or a decline.
- On an investment property, the line tops out at 70% CLTV and a $500,000 line, subject to lender guidelines.
- If the property is held in an LLC or the line is too small, a DSCR cash-out refinance is the usual pivot.
What a PACE Assessment Is, and Why It Cuts Into Your Equity
A PACE assessment pays for home improvements, often solar, efficiency upgrades, or storm hardening. You repay it through your property tax bill, not through a monthly mortgage payment. It is not a typical loan, and a title search shows it as a recorded assessment.
How large a line the equity supports.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 90% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
That tax-bill structure is the whole problem. In many states, the law gives that assessment priority over mortgages, much like unpaid property taxes. So the order of claims on the home can look like this:
1. Property taxes and the PACE assessment, where state law makes it senior.
2. The first mortgage.
3. A home equity line placed as a second lien.
A home equity line sitting third in that stack is a harder sell to a lender. If the home is sold or foreclosed, the PACE balance gets paid first. Whatever is left goes to the first mortgage, and the line is paid last, from whatever remains, which may already be little.
Priority is not identical everywhere. A trade-association summary of state PACE statutes shows state rules differ, and at least one excerpt shows a PACE lien ranking behind existing mortgages. Do not assume senior or junior. Read your own title report.
Bank Statements Solve One Problem
Lien Rules Solve Another.
Bank statement documentation lets self-employed borrowers show income through deposits instead of traditional personal-income documentation. The lender totals eligible deposits across a review window, commonly 12 or 24 months. It strips out transfers and non-income credits, and it often applies an expense factor to business accounts. An expense factor is a haircut the lender takes off business deposits to estimate real profit.
All of that answers one question: can you carry the payment? It says nothing about whether the collateral can support the loan.
That is the mix-up behind a lot of bad assumptions. A bank statement file is still a full file. Lien position, combined leverage, and title conditions come from a separate guideline grid. A strong deposit history will not lift a line past the leverage cap, and it will not move a PACE assessment out of first position.
Across the select wholesale lenders Lendmire works with, two tests run side by side. Your income has to support the line, and the property equity has to support it after every senior claim is counted. The strongest files pass both.
How Underwriting Treats a PACE Assessment, Step by Step
Here is the sequence a typical home equity file follows when a PACE assessment is on the property.
1. Income is documented. The deposit review produces a monthly income figure. The network’s home equity programs cap debt-to-income at 50%, with 45% for credit profiles from 600 to 679. The line is qualified on the interest-only payment calculated on the maximum draw.
2. Title is ordered. The search finds the PACE assessment as a recorded item or a tax-bill line. Many borrowers forget they have it, especially if the previous owner signed up.
3. Lien position is mapped. The title company and lender decide whether the assessment sits ahead of the new line. Where state law makes it senior, it counts as a prior claim.
4. The balance is netted from equity. Combined loan-to-value, or CLTV, is all liens on the property divided by its value. Where a lender counts the PACE balance, it eats into room under the cap. How a given lender counts it is a guideline question, not a federal rule.
5. The payment hits the ratios. Because the installment arrives on the tax bill, underwriters typically treat it like extra property tax. An escrowed borrower sees the monthly escrow rise. That lands in debt-to-income.
6. Conditions are issued. Typical outcomes are a payoff at closing, a smaller line, or a decline. Subordination of a senior tax-bill assessment is rarely something a borrower can simply request.
Treatment of PACE assessments varies from one wholesale lender to the next, and there is no single rule that applies to every non-QM equity line. That is exactly why the first conversation should happen before you apply, not after the title report lands.
A Worked Example in Percentages
Here is a hypothetical, with modeled assumptions and no sourced market data. Suppose the first mortgage is 50% of the home’s value, and the unpaid PACE balance is 8% of value.
An investment-property line caps at 70% CLTV on this network, subject to lender guidelines. If the lender counts both senior items, those two claims already use 58% of value. That leaves roughly 12% of value for the new line before any other overlay applies.
Now compare a home with no PACE balance. The same 50% first mortgage leaves 20% of value under that cap. The assessment cut the usable room by more than a third. The line size cap is a separate limit and does not make up the difference.
If the lender treats the assessment as a tax item only, the CLTV math may not change. The payment instead shows up in your ratios. Either way, you want the number before you apply.
Property values and balances change between application and closing. Treat any equity estimate as a rough sketch until the lender has a valuation and a payoff figure from the program administrator or tax collector.
What the Network’s Line Limits Look Like by Occupancy
The title does not say how the property is used, and the answer changes the limits. These are typical ranges from select wholesale lenders, subject to lender guidelines and full file review.
| Occupancy | Top CLTV | Credit tier | Max line |
|---|---|---|---|
| Investment property | 70% | 700+ | $500,000 |
| Second home | 90% | 720+ | $500,000 |
| Primary residence | 90% | 720+ | $500,000 |
Lower credit tiers step down to lower CLTV limits on second homes and primary residences. Investment lines start at a 700 credit profile, and the 70% ceiling is the top of that tier, with nothing above it. A line above $500,000 is for primary residences only and requires a full appraisal. Lines at or below $500,000 usually run on automated valuation.
The home equity programs hold title in the individual borrower’s name or an inter vivos revocable living trust. An LLC cannot hold title on these lines. That is a sharp difference from a DSCR loan, where LLC vesting may be available, subject to lender program eligibility.
Lendmire’s home equity placements are limited to a set of 16 full-service states, narrower than its 41-market DSCR footprint, which covers 40 states plus Washington, D.C.
Your Options When a PACE Assessment Is on Title
You have a handful of moves. Which one fits depends on the balance, the remaining term, and your timeline.
| Option | When it fits | What it does to the file |
|---|---|---|
| Pay it off first | Balance is small | Clears the title item |
| Pay it off at closing | Lender allows it | Payoff becomes a closing condition |
| Leave it in place | Lender counts it in CLTV | Shrinks the line, adds tax-bill cost |
| Wait out the term | Few installments remain | Lower balance next time |
| Refinance with DSCR | Property is held in an LLC or line is too small | Pays off PACE inside a new loan |
Sequencing matters when you stack tools. Plan the PACE project, the equity line, and any later DSCR refinance in a deliberate order. A PACE assessment added after a line closes can jump ahead of that line, and a line lender will not enjoy that surprise. One that already exists at application is a title and CLTV item you can price in.
Lendmire’s piece on how lien position rules work on a paid-off home covers the first-or-second-lien choice in more depth. Its coverage of solar liens and unpermitted additions on a bank statement line handles the neighboring problem, since solar is the most common PACE use.
When the Equity Line Is the Wrong Tool: The DSCR Pivot
If you are buying or refinancing a pure rental, a DSCR loan is the usual better fit. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. That makes it a different question from bank statement income. The complete DSCR loans guide covers how the ratio works from the ground up.
Here is what the pivot looks like in practice, across most programs in the network:
- Cash-out refinance tops out around 75% LTV, with about 6 months of seasoning as the common expectation.
- 1.00 coverage is where many select programs start. A separate select-lender path goes below 1.00, with leverage and terms adjusted.
- Credit floors vary by scenario in parts of the network. Most programs want around 660, and 700 or better unlocks the strongest leverage tiers.
- Standard loan sizes reach up to $3,000,000 on standard programs, with smaller balances available through select lenders.
- Reserves commonly run around 6 months of PITIA, which is principal, interest, taxes, insurance, and any HOA dues. They vary with leverage, loan size, and transaction type.
A DSCR cash-out can retire a PACE balance inside the new loan. The assessment gets paid at closing, the title clears, and the new first lien sits in first position. Coverage includes the tax line, so an unpaid PACE installment still affects the ratio until it is gone.
One caution. Clearing 1.00 coverage does not mean the property cash flows. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside that math.
A larger down payment lowers the payment and can lift coverage. It never erases leverage caps, credit floors, reserve rules, or property eligibility. For an investor weighing a rental refinance, the strongest files clear both tests, enough equity and enough rental coverage.
Where the General Rule Breaks
The “PACE sits ahead of everything” shortcut fails in several named cases.
- Commercial PACE is a different animal. Commercial assessments, called C-PACE, generally rank like real estate taxes too, but the federal residential rule discussed below covers residential PACE only. Do not mix the two when you read a blog post.
- State law can flip the order. Some states put the assessment behind existing mortgages. The state determines the stack, not a rule of thumb.
- Sequence changes everything. A PACE assessment that exists before the line is a CLTV and title item. One added afterward can prime the line.
- Escrow shortage. Adding a PACE installment to an escrowed loan can leave the escrow account short. A bank commenter flagged this in a public comment letter to a federal housing regulator. That is one commenter’s view, not a rule.
- Ineligible collateral. Manufactured homes, co-ops, condotels, log homes, and commercial or mixed-use zoning are not eligible on the equity programs. PACE or no PACE, those never get to the lien question.
- Listed for sale. A property listed within the past 60 days is ineligible in some states. Check this before you pay for an appraisal.
- Large portfolios. A borrower with more than 15 financed properties is not eligible, and total exposure across lines is capped.
Does the New Federal PACE Rule Change Any of This?
No. The lien order still comes from state law.
The CFPB’s residential PACE rule page describes PACE as financing for home improvements that results in a tax assessment on the borrower’s real property. The final rule applies ability-to-repay requirements to PACE creditors. It does not set lien priority, and it does not govern HELOC lenders.
One piece does touch your file. The Federal Register text requires PACE creditors to consider escrow payments the borrower owes on the existing mortgage. For an escrowed borrower, a new assessment raises that monthly escrow.
A law-firm summary of the rule adds that the rule gives PACE no qualified-mortgage presumption of compliance. In plain terms, the rule makes new PACE deals harder to write. It does not make your existing one any less senior.
Rule status can move, so check its current standing before you rely on it.
Key Terms Defined
PACE assessment: A home-improvement financing repaid through the property tax bill instead of a regular mortgage payment.
Lien position: Where a claim ranks when the property is sold or foreclosed, with first position paid first.
CLTV: Combined loan-to-value, meaning every loan secured by the property divided by its value.
Expense factor: A percentage a lender removes from business deposits to estimate profit.
Super-priority lien: A lien that state law ranks ahead of earlier-recorded mortgages.
DSCR: Debt service coverage ratio, which compares a rental’s income to its full monthly obligation.
Seasoning: The waiting period a lender wants between two events, such as owning a property and refinancing it.
How an Investor Should Work Through This
Start with the title, not the application. Order a title report or pull the tax bill. Look for a PACE line and note the remaining balance and term.
Then ask the program administrator or tax collector for a payoff figure. Do not guess from the monthly installment.
Next, decide the structure. If your equity is thin and the line is for a rental, compare a DSCR cash-out. Lendmire’s explainer on pulling equity with a cash-out refinance is one place to start the comparison. If your credit and occupancy fit the equity line, ask the lender early how the PACE balance is treated in CLTV and in ratios.
Last, plan the order. Pay down or retire PACE first when the balance is small. Otherwise, bring it into a deliberate sequence with the line and any later refinance.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Frequently Asked Questions
Can I get a bank statement HELOC if I already have a PACE assessment?
Sometimes. It depends on the lender, the balance, your state, and the CLTV after the assessment is counted. Some lenders require a payoff at closing, and others count it against equity. Bank statements prove income and do not remove the title item.
Is a PACE assessment a mortgage?
No. It is a tax-bill assessment tied to the property, not a mortgage lien you signed with a lender. That is why it can outrank mortgages in states where the statute gives it priority.
Does the PACE payment count in my debt-to-income ratio?
Typically yes, as an added tax-bill cost. Underwriters treat the installment like property tax in the ratios. On this network’s equity lines, debt-to-income caps at 50%, subject to lender guidelines.
What if my rental is held in an LLC?
The home equity programs cannot take title in an LLC, so the property would need a vesting change. A DSCR cash-out is the usual alternative, subject to program terms.
Can I use the new line to pay off the PACE balance?
A lender may allow a payoff at closing, which shifts the title item out of the way. Whether that works depends on the line size, CLTV after payoff, and the lender’s conditions. Ask before applying.
Next Step
If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Lendmire is a broker and arranges financing through select lenders in its wholesale network, and every figure above is subject to lender guidelines and full file review, not a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker. Home equity lines of credit — on a primary residence, a second home or an investment property — are arranged through wholesale lenders in Lendmire’s 16 full-service states, and every line is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. ACMA – State-law summary of PACE
2. FHFA public comment letter (bank commenter)
3. CFPB – Residential PACE Financing rule page
4. Mayer Brown – CFPB crosses the finish line to regulate PACE financing
This article is part of Lendmire’s bank statement HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Founder Use a Super Jumbo Bank Statement Cash-Out to Invest? · Bank Statement HELOC for a 2-4 Unit Home and Your Low First Mortgage · How to Time a Super Jumbo Cash-Out as a Loan-Out Company Entertainer
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.