The Quick Read: A PACE assessment is a lien that rides on your property tax bill, so the cleanest way to deal with it is usually to retire it at closing from the new loan’s proceeds. You request a written payoff, size the cash-out to cover it, let the title company pay the administrator, and then confirm the lien is released. Jumbo lenders set their own PACE policies, so the first question to ask is whether the lien can stay or must go. Everything here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Key Takeaways
- A PACE payoff comes out of your cash-out proceeds. It is not cash in your pocket.
- The lien is tied to the property and is typically paid ahead of a mortgage. That is why lenders care.
- There is no single jumbo rule. Each wholesale lender decides whether to require payoff, allow the lien to stay, or decline.
- A written payoff statement, a title commitment showing the lien removed, and a clean tax bill afterward are the three checkpoints.
- If the payoff does not fit under the cash-out limits, the options narrow. Plan that math before you apply.
Jumbo cash-out estimate
Enter the value, the balance, and the cash wanted; choose the occupancy and the structure; the lanes, the payment, and the reserves follow.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a jumbo cash-out refinance quote.
Illustrative starting assumptions: a $2,000,000 home value in the jumbo range, a $1,000,000 current balance, a principal residence on a thirty-year fixed structure at the current Freddie Mac conforming benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conforming benchmark, a market reference and not a jumbo cash-out refinance quote; a jumbo loan is priced by the lender at lock. The lanes shown are the wholesale cash-out lanes behind this page as of the snapshot date; the calculator reads each lane’s leverage, loan maximum by occupancy, cash-in-hand cap, and reserves as the lane table states them, and a Lendmire loan officer confirms the lane on the file. The cash available is the loan the lane allows less the balances paid off, before closing costs, which are not included; on most lanes a jumbo cash-out begins one dollar above the conforming limit for the county, and two lanes start at a stated dollar floor instead. The HELOC line is the line program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
What Is a PACE Assessment, and Why Does It Complicate a Cash-Out?
A PACE assessment finances energy or resilience upgrades, such as solar panels, windows or HVAC, and you repay it through your property tax bill. It is not a mortgage. It sits on the property as an assessment, and in many places it has the same standing as a tax lien. Tax liens are paid ahead of mortgages, including mortgages recorded earlier.
That standing is what creates the problem. A new lender wants to be first in line. If a PACE lien can jump ahead of the new loan, the lender faces a risk it did not price. Many lenders respond by requiring the lien to be paid off at closing.
Jumbo borrowers run into this often. High-value homes attract large energy projects, and a homeowner with a sizable PACE balance may also want to pull equity for other goals. Lendmire’s jumbo cash-out refinance program is one place where this plays out. Across the wholesale jumbo lanes Lendmire arranges, the PACE lien is one of the first items a lender asks about. It shows up on the tax bill and the title commitment, so it is hard to miss.
Here is the key point. A payoff inside a cash-out is a use of your equity. The new loan has to be big enough to cover the existing mortgage, the PACE balance and the closing costs. Whatever remains is your net cash. If the PACE balance is large, net cash shrinks.
Key Terms Defined
PACE assessment: A property-secured financing arrangement for home improvements, repaid as a charge on the property tax bill.
Payoff statement: A written figure from the PACE administrator showing what it takes to clear the assessment on a stated date.
Good-through date: The last day the payoff figure is valid, since interest keeps accruing until payment.
Lien release: The recorded document showing the assessment has been satisfied and no longer encumbers the property.
Cash-out refinance: A new mortgage larger than the one it replaces, with the difference paid to you or to creditors at closing.
Jumbo loan: A mortgage that begins one dollar above the county’s conforming limit.
How Does a Jumbo Lender Treat a PACE Lien?
Treatment is lender-specific, and no public guideline sets one standard for non-agency loans. That is the honest starting point. What follows is how the market usually thinks about it, not a universal rule.
The agency rules are the benchmark many lenders borrow from. Fannie Mae’s Selling Guide says it will not purchase loans on properties with an outstanding PACE loan unless the program does not give the PACE loan priority over first mortgage liens. The Federal Housing Finance Agency has said that mortgages backed by Fannie Mae and Freddie Mac must stay in first-lien position. A homeowner with a first-lien PACE loan cannot refinance into an agency loan.
Jumbo loans are not bought by the agencies. That does not mean the concern disappears. Jumbo lenders hold or sell their loans to private investors who often want the same clean first-lien position. The agency rules are a reasonable guide to the worry. They are not the jumbo rule.
In the files Lendmire sees, a few patterns repeat:
- Most lenders want the lien paid off at closing from proceeds.
- Some may consider leaving it in place, but the monthly assessment then counts toward your housing costs and ratios.
- Some decline the file until the PACE issue is resolved.
The headline jumbo lane works with a 660 decision score and leverage up to 90%, with loans up to $5,000,000 on the largest lanes. Cash-out runs at lower leverage than purchase, and the largest lanes carry a cash cap. Ratio ceilings are 50% on the fixed lanes, 45% on the adjustable lanes and 43% on the interest-only lanes. Reserves are counted in months of the full payment and rise with the loan amount. Above a lane’s threshold amount, two appraisals are required. All of it is subject to lender guidelines and full file review.
Why does that matter here? Because the PACE payoff competes for room under those cash-out limits. A payoff that fits comfortably is a routine closing item. One that crowds the leverage cap leaves you with little or no cash.
Three Ways to Fund the Payoff
You have three realistic paths. Which one fits depends on your cash, your equity and how the new lender treats the lien.
| Path | How it works | Main trade-off |
|---|---|---|
| Pay with your own cash | Clear the lien before applying | Uses liquid savings; may raise cash-out questions |
| Second lien or credit line | Borrow against equity, then pay the lien | Adds a loan and a layer of cost |
| Payoff inside the cash-out | Title pays the administrator at closing | Reduces net cash; needs room under the cap |
Paying with your own cash is the simplest on paper. The catch is the paper trail. A lender will want to know where the money came from and how the payoff happened. Whether paying beforehand changes how the refinance is classified is a question for your lender, not an assumption to make.
A second lien or credit line can clear the assessment while you keep your existing first mortgage. It makes sense when the first mortgage is worth keeping. It adds a second payment and a second set of closing steps, though, and a later jumbo cash-out would have to account for it.
Payoff inside the cash-out is the standard route. The new loan replaces the old mortgage, the title company wires the payoff to the administrator, and the lien is retired in the same closing. For borrowers whose goal is to take equity out anyway, this is usually the most direct path.
If you plan to use the same cash-out to clear other balances, such as a brokerage-backed credit line or cards, read Lendmire’s piece on whether a super jumbo cash-out can pay off a securities-backed line and cards. Stacking several payoffs inside one loan changes how much cash is left.
How the Payoff Comes Out of Your Cash-Out Room
Here is the arithmetic in words, with no dollar figures.
1. Start with your home’s appraised value.
2. Apply the lane’s maximum cash-out leverage. That is your ceiling on the new loan.
3. Subtract your existing mortgage balance.
4. Subtract the PACE payoff, including any prepayment charge or administrative fee.
5. Subtract closing costs, which appear on your Loan Estimate and Closing Disclosure.
6. What remains is your net cash, if anything. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Two things shift that result. First, a large PACE balance on a modest equity cushion can use up most of the room. Second, a cash cap on the largest lanes can limit proceeds even when the leverage math leaves space.
Picture a homeowner whose existing mortgage already uses most of the allowed leverage. A sizable PACE lien on top of that can eat the remaining room. The refinance may work only as a payoff, with little or no cash left over. In that case the question changes from “how much can I take out” to “does this refinance make sense at all.” That question is worth answering before you pay for an appraisal.
The Payoff Sequence, Step by Step
Order matters. Doing these steps in the wrong sequence can stall a file.
1. Identify the assessment. Find the PACE line on your property tax bill. Contact the program administrator and ask for your contract.
2. Tell your loan officer early. The lender will ask whether the property is subject to a PACE lien. Disclosing it up front avoids a surprise at title.
3. Request a written payoff statement. It should show principal, accrued interest and any prepayment charge or fee. Ask for a good-through date that covers your expected closing, and a per-day amount in case the date moves.
4. Size the loan to retire the lien. The payoff is a closing item, paid from proceeds by the title company or settlement agent.
5. Review the title commitment. It should show the PACE lien as an item to be paid and released at closing.
6. Complete the appraisal. The appraiser should know the assessment will be paid off, since it affects how the property’s obligations are described. Above a lane’s threshold amount, two appraisals apply.
7. Check the Closing Disclosure. The payoff amount, any prepayment charge and recording costs should be listed. A stale payoff figure is a common reason numbers change late.
8. Close, then verify. After closing, confirm the lien release has been recorded and title shows it cleared. When the next tax bill arrives, check that the PACE charge is gone.
Step 8 is the one people skip. A payoff that is never recorded can leave a lien on the books long after you believe it is gone.
Where the General Rule Breaks
The “pay it off at closing” rule holds for most jumbo files. A few situations bend it.
Retained PACE. Some files keep the lien in place. Fannie Mae’s guide says that if the borrower cannot qualify for enough proceeds to pay it off, the lender may underwrite a limited cash-out refinance with the PACE loan staying. The same guide says the PACE loan need not count in the combined loan-to-value calculation, but its monthly charge counts in housing expense and the debt-to-income ratio. For a jumbo file, the equivalent is that the payment would count against the ratio ceilings above. That is an agency rule, not a jumbo one. A jumbo lender decides for itself.
Subordinate or unsecured PACE. The same guide notes that if the PACE loan is structured as a subordinate lien or an unsecured loan, the first mortgage may be underwritten to standard guidelines. Not every program is built that way, so read your contract.
Older grandfathered loans. The FHFA’s statement on energy retrofit loan programs waived the senior-lien prohibition for PACE loans obtained before a cutoff set more than a decade ago. That relief is narrow and tied to agency purchase dates. It rarely helps a jumbo borrower.
The cash-out trap on agency loans. Fannie Mae’s cash-out rules say borrowers with enough equity to pay off a PACE loan who choose not to are ineligible for a cash-out refinance. The reasoning carries over in spirit. A lender that sees a senior lien and ample equity will often ask why the lien is not being cleared.
A renovation product that can pay PACE. Fannie Mae’s HomeStyle Refresh can include paying off higher-interest energy-related debt such as PACE loans, with documentation showing the funds are used solely for that payoff. It is an agency product, not a jumbo feature.
Selling instead of refinancing. On a sale the lien transfers to the buyer, but the buyer’s lender may require payoff first.
What to Gather Before You Apply
- The PACE agreement and the administrator’s contact details
- Your most recent property tax bill showing the assessment
- A written payoff statement with a good-through date
- Your current mortgage statement
- A title report or preliminary commitment showing the lien
- Documentation of the improvements, if the lender asks for it
Bring the PACE items first. They tend to be the slowest to collect, and everything else depends on the payoff number.
Common Mistakes
- Treating PACE as an ordinary loan you can leave alone. The lien attaches to the property, not just to you, and is typically paid ahead of a first mortgage.
- Assuming going jumbo avoids the agency worry. Jumbo lenders have their own guidelines, and the senior-lien concern is the same.
- Counting the payoff as cash to you. It reduces net proceeds.
- Using a stale payoff statement. If closing moves, the figure moves with it.
- Skipping the release check. A recorded release and a clean tax bill are the proof.
- Assuming the next buyer inherits it without consequence. Their lender may require payoff before they close.
One more point on cost. PACE can raise a tax bill by a large amount, and a Mayer Brown summary of the CFPB’s research findings says PACE borrowers were more likely to become delinquent on their first mortgage. That is part of why lenders look closely. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What the Decision Looks Like in Practice
Most borrowers face three questions, in this order.
First, does the PACE lien have to go? Ask the lender directly. If the answer is yes, the rest is arithmetic.
Second, does the payoff fit under the cash-out limits? Run the six-step math above. If net cash is thin, consider whether the refinance still serves your goal.
Third, is a different route better? If you like your current mortgage, a second lien or a payoff from savings may beat a full refinance. If you want to take equity out anyway, folding the payoff into the cash-out is usually the more direct path.
The honest uncertainty is that jumbo policy varies by lender and by file. A lender that tolerates a retained lien on one file may decline it on another. That is why asking early matters more than any rule of thumb.
Deciding What to Do Next
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.
Frequently Asked Questions
Can I pay off a PACE assessment in full before a refinance?
Usually yes, though terms depend on your agreement and the program. Ask the administrator for a written payoff that shows principal, accrued interest and any prepayment charge or fee. Some programs allow partial paydowns, but a lender that requires the lien cleared will usually want a full payoff.
Does a PACE payoff count as cash-out money I receive?
No. The title company pays the administrator from the loan proceeds, so you never receive that money. It does reduce your net cash. Whether a payoff affects how the transaction is classified depends on the lender, and for agency loans there is a specific exception that jumbo lenders may or may not mirror.
Will a jumbo lender let me keep the PACE lien?
It depends on the lender. Some require payoff, some may consider leaving it in place with the monthly charge counted in your ratios, and some will not move forward until it is resolved. No public rule governs this, so confirm it against the specific program before you order an appraisal.
What if the payoff is bigger than my cash-out room?
Then the refinance may not work as planned. Options include paying part of the lien from savings, using a second lien, or keeping the lien where the lender permits it. Each has trade-offs, and eligibility remains subject to lender guidelines and full file review.
How do I know the lien is really gone after closing?
Check three things: a recorded lien release, a title record showing the assessment cleared, and a later tax bill with no PACE charge. If any of those is missing, contact the administrator and the title company.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see jumbo loan programs.
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References
1. Fannie Mae Selling Guide: Property Assessed Clean Energy Loans
2. FHFA Statement on Certain Super-Priority Liens
3. FHFA Statement on Certain Energy Retrofit Loan Programs
4. Fannie Mae Selling Guide: Cash-Out Refinance Transactions
5. Fannie Mae HomeStyle Refresh FAQ
6. Mayer Brown: The CFPB Crosses the Finish Line to Regulate PACE Financing
This article is part of Lendmire’s Jumbo Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Buy Out an Ex With a Jumbo Cash-Out on a Paid-Off Home · Does a Buyout on a Paid-Off Home Count as a Jumbo Cash-Out? · Jumbo Cash-Out Asset Income Rules for a Paid-Off Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.