The Quick Read: A solar lien does not automatically block an FHA cash-out refinance, but the type of solar deal decides what has to happen before closing. Owned or loan-financed panels usually need a clean lien position. Leased panels usually need a payoff, a transfer, or a termination of the filing. An unpermitted addition is mostly an appraisal and legality question, and it can shrink the cash you walk away with.
Key Takeaways
- The FHA cash-out refinance reaches up to 80% of the home’s appraised value, on a home you have owned and lived in for 12 months before the case number is assigned. Subject to lender guidelines and full file review.
- The lender needs to be first in line on title. A solar filing that claims the real estate can threaten that position.
- Panels owned by a third party add nothing to appraised value. Less value means a smaller maximum loan and less cash.
- A property-tax-based solar loan (PACE) cannot stay on an FHA-insured loan. It gets paid off at closing.
- An unpermitted addition is judged on legality, safety, and function. The appraiser may exclude it from value or condition the report on repairs.
- Every payoff at closing comes out of your proceeds. Plan for net cash, not gross.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
Key Terms Defined
FHA cash-out refinance: A new FHA-insured mortgage that replaces your current loan and lets you take part of your equity as cash.
UCC-1: A public notice filed by a solar company saying it claims an interest in the panels.
Fixture filing: A UCC-1 recorded in the county land records, which can tie the panels to the property itself.
UCC-3: The filing that terminates a UCC-1. Paying off the solar company does not clear the record until this is recorded.
Subordination: A written agreement where one creditor agrees to rank behind another.
PACE: A home-improvement loan, often for solar, repaid through your property tax bill.
PPA (power purchase agreement): A deal where a company owns the panels and you pay for the electricity they make.
Case number: The FHA identifier assigned to your file. Several FHA timing rules count back from it.
How an FHA Cash-Out Works Before Solar Enters the Picture
An FHA cash-out replaces your existing mortgage with a larger one and pays you the difference. You can spend the cash on anything. The loan must be on your principal residence, and across the wholesale programs Lendmire works with, the FHA cash-out stops at 80% of appraised value.
That 80% is a ceiling, not a promise. The appraisal sets the value. Your existing mortgage gets paid first. Any other lien the lender requires you to clear gets paid next. What is left is your cash. For a closer look at the basics, see Lendmire’s page on the FHA cash-out refinance program.
The loan also carries FHA mortgage insurance: an upfront premium of 1.75% of the base loan, which is financed, plus an annual premium. Both are program mechanics, subject to lender guidelines.
Then the lender reviews income, debts, and credit. Debt ratios start at 31/43 with no extra support. Documented compensating factors can stretch them toward 40/50. Hold onto that last point, because a solar lease payment can land in the debt column.
What a Solar Lien Does to the File
Start with the contract, not the roof. Solar comes in five shapes, and each leaves a different footprint on title and on the appraisal. Lenders handle each one differently.
| Solar structure | Usual title footprint | Effect on cash-out | Usual clearing path |
|---|---|---|---|
| Owned outright | None | Value may count if sales support it | Nothing to clear |
| Financed, UCC only | UCC-1 on panels | Lien position questioned | Payoff or subordination |
| Financed, recorded lien | Deed of trust or lien | Competes for first position | Payoff or subordination |
| Lease or PPA | UCC-1, sometimes a fixture filing | No value credit; payment may count as debt | Buyout, transfer, or termination |
| PACE | Assessment on tax bill | Cannot stay | Paid off at closing |
The deciding question is lien position. A mortgage lender wants to be first in line. A filing that claims only the panels is a lighter problem than one that claims the real estate. Some lenders and title companies ask for a termination or subordination either way. (Title companies tend to prefer a clean file to a clever argument.)
The appraisal is the second hit. Panels you own may add value, but only when comparable sales support it. Panels owned by a third party do not count toward value at all. Appraisers treat them as the solar company’s equipment, not part of your home.
Run that through a cash-out. Value drives the maximum loan. If the panels add nothing, you cannot borrow against them. If you also owe the solar company at closing, your net cash drops again.
The third hit is your monthly budget. Lenders may count a lease or PPA payment as a monthly obligation. That can push debt ratios up, so expect the lender to ask about it.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Clearing the Lien: A Step-by-Step Sequence
Do these in order. Skipping ahead is how files stall.
1. Pull the contract. Find out whether the system is owned, loan-financed, leased, under a PPA, or PACE. Everything else follows from this.
2. Order a title search early. Ask specifically for UCC filings and fixture filings in the county records. A clean-looking title report does not prove a clean file.
3. Request a payoff or buyout statement. Ask the solar company for the figure and for its process to terminate the filing. Some providers are slow. Some no longer exist.
4. Pick the path. You can pay off at closing from proceeds, buy out the lease, transfer it, or ask the provider to subordinate. Payoff is the cleanest. Subordination is the hardest to get.
5. Confirm the termination is recorded. Payoff is not the finish line. The UCC-3 has to be filed, and someone has to verify it.
6. Re-check your debt ratios. If a lease payment stays on the books, the lender will count it. Know the number before you apply.
Ask your lender and title company three things up front. What filing do you need removed? Will a subordination be accepted, or only a payoff? Who confirms the termination is recorded?
PACE: The One Solar Loan That Cannot Stay
PACE is its own animal. It is repaid through your property tax bill, so it ranks ahead of the mortgage. FHA policy lives in HUD’s Handbook 4000.1, and Mortgagee Letters amend it between updates. One of them, Mortgagee Letter 2017-18, made properties with PACE obligations ineligible for FHA-insured forward mortgages, and it treats PACE as debt to be extinguished in a refinance.
The background is simple. HUD announced that it would stop insuring new mortgages on homes carrying PACE assessments. The practical result for you: a PACE balance gets paid off at closing, and on a cash-out the payoff comes from your proceeds.
Consumer rules around PACE have also tightened. The CFPB’s final rule on PACE financing requires PACE lenders to assess ability to repay and give mortgage-style disclosures. That protects future borrowers. It does not change what happens to a PACE balance you already have.
A Worked Example, in Percentages
Take a modeled home. This is an illustration, not a quote or a promise of any loan terms.
Say the appraisal supports the value you expected. The maximum cash-out loan is 80% of that value. Your current mortgage balance is 55% of value. A solar loan payoff is another 5%. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
- Maximum loan: 80% of value.
- Existing mortgage payoff: 55%.
- Solar payoff: 5%.
- Left before costs: 20%.
- Then subtract closing costs and the financed upfront premium, which is 1.75% of the base loan.
Change one input. If the panels are leased and the lender wants them bought out, the same math applies, and the buyout figure replaces the payoff.
Now change the appraisal. If it comes in lower than you hoped, the 80% ceiling drops with it, and the same payoffs eat a bigger share. Some borrowers find that the cash they wanted is gone. Better to learn that before you apply than at the table.
Unpermitted Addition: An Appraisal Problem First
An unpermitted addition rarely shows up on title. It shows up in the appraisal. The appraiser walks the home and describes what is there. They look at whether the space is legal, well built, and usable, not only at how many square feet it adds.
In practice, three questions decide how the file treats it:
- Is the space legal under local zoning for how it is used?
- Is it safe and finished to a livable standard?
- Do comparable sales support the value of the extra space?
A missing permit on otherwise legal, well-built work is a lesser problem than a zoning violation. A converted garage with no permit and a bedroom with no proper exit are different stories. Lender overlays decide a lot here. Some lenders will not fund a loan on a home with an addition they consider illegal, whatever the FHA minimum says.
| Situation | How appraisers often treat it | Likely effect on cash-out |
|---|---|---|
| Legal use, no permit, sound work | May count if comps support | Smaller hit on value |
| Unfinished or unsafe space | Excluded, or repairs required | Lower value; repairs first |
| Space violates zoning | Excluded from value | Lower value; possible denial |
| Appraiser flags health or safety items | Report conditioned on repairs | Repairs before closing |
You have three practical choices. Permit it, remove it, or accept that it does not count. Permitting adds cost and review steps and is not always possible. Removing it undoes your investment. Leaving it out of value keeps the loan clean but lowers your cash.
Two cautions. Do not hide an addition from the appraiser. And do not assume an addition that adds value in your neighborhood adds it in the lender’s eyes.
When Both Problems Exist
Say you have a leased solar system and an unpermitted bedroom. This is where files get slow, and it is also where planning pays off most.
Work on title first, because it takes outside parties. Request the solar payoff or buyout statement and the termination plan right away. At the same time, decide what to do about the addition before the appraiser visits. If you plan to permit or remove it, finish that first, or know it will be excluded from value.
The two problems interact through value. Panels you do not own add zero. An addition that is excluded adds zero. Your value, and your 80% ceiling, may come in well below what you had in your head. Then the solar payoff comes out of what is left.
Honestly, this is the combination where some borrowers are better off waiting. Fix the addition, clear the filing, then apply with a file the lender can read in one pass. A rushed application on a messy file is not a time saver.
Where the General Rule Breaks
The solar company is gone. A defunct provider cannot sign a subordination or file a UCC-3. Expect to need a title company that can work around it. This can add steps and cost.
Third-party owned versus financed. The rule of thumb that panels add value only applies when you own them. If you financed them, they may count. If someone else owns them, they do not.
PACE. It breaks the usual “subordinate and move on” logic. A PACE obligation cannot stay on an FHA loan. Payoff is the path.
Occupancy. Standard FHA cash-out is for a principal residence only. The 12-month ownership and occupancy test can decide the file before the solar question even comes up. Occupancy decides leverage here, so a second home or rental follows different rules.
Fixture filing versus panels-only filing. A filing that claims only the panels is treated differently from one that claims the real estate. Conventional guides address this distinction. FHA lenders and title companies often still ask for a termination.
“80% LTV” is not what you get. Appraisal, lien payoffs, and credit and income review all limit your proceeds. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Next Steps
Before you apply, gather your solar contract, your latest mortgage statement, and any permits you have for additions. Ask the solar company for a payoff figure in writing. Ask your title company to search for UCC and fixture filings. Then decide what to do with any unpermitted space.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Every program figure is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I get an FHA cash-out refinance if I have leased solar panels?
Often yes, but the lease creates work. The lender will likely want the filing on title addressed through a buyout, transfer, or termination. The lease payment may count against your debt ratios, and the panels will not add to appraised value. Each lender sets its own overlays on top of FHA’s basics.
Does an FHA appraiser add value for solar panels?
Only when you own them and comparable sales support it. Panels owned by a third party, such as under a lease or PPA, are treated as the owner’s equipment and do not count toward value. Appraisers are expected to identify solar systems in their report.
Can a PACE loan stay on my home if I do an FHA cash-out?
No. FHA treats PACE as debt that must be extinguished in a refinance. On a cash-out, the payoff generally comes from your proceeds, which lowers your net cash.
Will an unpermitted addition stop my FHA cash-out?
It can, but it does not have to. The appraiser looks at legality, safety, and function. A sound, legal addition without a permit may be treated more gently than one that breaks zoning or has safety problems. Lenders often add their own rules, so some will decline unpermitted space outright.
Does paying off the solar company clear my title?
Not by itself. The termination filing (UCC-3) has to be recorded after payoff, and someone should confirm it. Skipping that check can leave a filing on title that could cost you a closing.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For current guidelines, see FHA loan programs.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. HUD Handbook 4000.1 information page
2. HUD Mortgagee Letter 2017-18
3. HUD Archives press release 17-111
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: FHA and Conventional Cash-Out Requirements for a Condo Primary Home · Should a Paid-Off Home Get an FHA Cash-Out Instead of a Second Lien? · FHA Cash-Out Requirements vs What an FHA Streamline Allows
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.