The Quick Read: A leased solar system does not block this loan, but it changes three things: the appraisal, the title, and your monthly budget. The VA gives the panels no value, so they add nothing to your cash-out. The solar company’s filing on your title usually has to be cleared, moved behind the new loan, or accepted by the title company. Start with that paperwork, because it decides how smoothly the rest goes.
VA cash-out estimate
Seeded with an example value, a typical balance, and a round cash request at the first-use fee; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the full-value VA cap with the first-use funding fee 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.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a VA cash-out refinance quote; a VA loan is priced by the lender at lock. The total loan, funding fee included, is capped at the program leverage on the reasonable value; the fee follows the tier chosen. The cash available is what the cap allows less the balances paid off and the fee, before closing costs, which are not included. 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. The debt-to-income figure is a guideline; residual income decides a VA file. Licensed in sixteen states for consumer mortgages.
(Quick note: “VA” here means the Department of Veterans Affairs home loan benefit, not the state of Virginia.)
Key Takeaways
- Leased and power-purchase panels get no value in a VA appraisal. Your equity is measured without them.
- The new loan can reach 100% of the appraised value, and a financed funding fee counts toward that cap.
- The solar company’s filing on your title is the usual snag. You have three ways to deal with it: payoff, transfer, or subordination.
- Your lease payment stays in your budget. It can pull down residual income, which is the controlling VA test.
- Buying out the lease is a cash cost. It shrinks what you walk away with.
What Does a VA Cash-Out Actually Do?
A VA cash-out refinance replaces your current mortgage with a new VA loan and lets you take some equity as cash. In the wholesale programs Lendmire places VA files with, the new loan can reach 100% of the appraised value, financed funding fee included. It can also refinance any loan type into VA. That includes a conventional or FHA loan you hold today. You can read the basics on Lendmire’s VA cash-out refinance program page.
Three features matter for this topic.
First, there is no mortgage insurance. Second, there is no VA loan limit when you have full entitlement. Third, the file is underwritten on residual income first. Residual income is the money left each month after your debts, taxes, and basic living costs. The 41% debt-to-income figure is a guideline, not a hard cap. A ratio above it just needs residual income well above the VA table.
Cash-outs also carry a net tangible benefit test. In plain terms, the new loan has to leave you better off in a way the file can show. Seasoning applies too: the later of 210 days from your first payment date and your sixth payment. Wholesale programs generally start at a 580 decision score, subject to lender guidelines and full file review.
A solar lease touches none of those rules directly. It touches the property and your budget, and those feed into the rules above.
Why Does Leased Solar Change the Loan?
Leased solar changes the loan because you do not own the panels. The solar company does. That one fact drives the appraisal, the title work, and the way your payment is counted.
Think of the panels like a rented water heater, only bigger and bolted to your roof. The house is yours. The equipment is the provider’s. The VA’s rules follow that split. In the transmittal for its Lenders Handbook chapter on minimum property requirements, the VA states that no value must be given to leased equipment, including leased solar systems.
Owned systems are different. A VA lender training deck on energy efficiency and VA home loans lists leased solar among the systems that are not valued. It says equipment carrying a personal loan may have market value. So two identical roofs can be treated differently based only on the paperwork behind them.
The four structures, side by side
Before anything else, work out which of these describes your system. The lender, not the appraiser, has to pin that down.
| Structure | Appraisal value | Title effect | Budget effect |
|---|---|---|---|
| Owned outright | May count | Usually none | None |
| Financed with a loan | May count | Possible fixture filing | Loan payment |
| Leased | No value | Provider filing likely | Monthly lease |
| Power-purchase agreement (PPA) | No value | Provider filing likely | Monthly energy charge |
A PPA means you pay the provider for the power the panels produce, instead of paying a flat lease. For loan purposes it gets the same appraisal treatment as a lease. The Fannie Mae Selling Guide draws the same line for conventional loans: panels leased from or owned by a third party under a PPA are personal property and stay out of appraised value.
How Is the Loan Underwritten, Step by Step?
The deal works in a fixed order. Each step sets up the next, so skipping ahead tends to cost you.
1. Name the structure. Tell your loan officer whether the system is leased, on a PPA, financed, or owned. Gather the signed agreement and any provider letter that confirms the terms.
2. Pull the title and a separate filing search. The solar company usually records a notice of its interest in the equipment. That is called a UCC-1 filing. It can also appear as a fixture filing in the county land records.
3. Order the appraisal. The VA appraiser reports the panels but gives them no value. Value comes from comparable sales, without credit for the leased system. The appraiser also notes any detrimental effect on value if the leased items were removed.
4. Size the loan. The new loan, including any financed funding fee, cannot go above the property’s reasonable value. VA Circular 26-19-05 says VA no longer guaranties refinancing loans over 100% loan-to-value. It also separates two kinds of refinance. A loan that stays within the payoff is Type I. A loan that exceeds the payoff is Type II. A true cash-out is Type II.
5. Clear the filing. The title company decides what has to happen. More on that below.
6. Underwrite the budget. The lender looks at your income, debts, and residual income, with the lease payment in the picture.
Notice what is missing: any step where the lease adds to your loan balance. A lease is not a debt secured by your house. It shows up as a monthly obligation, not as a lien amount stacked into the loan-to-value math.
What Is the UCC Filing, and Does It Block Closing?
A UCC filing is a public notice that a creditor has an interest in a piece of property. The VA training deck describes it as a public notice filed with the Secretary of State. It is not a mortgage on your home. It points at the equipment.
Here is the catch. A fixture filing recorded in the land records can still cloud your title. A cash-out needs the new VA loan in first-lien position. So the title company has to decide whether the filing must be cleared or can stay.
That decision is the title company’s call, not the VA’s and not the borrower’s. Industry practice offers three paths, which is how a title-industry source lays them out:
| Path | What happens | Choose it if |
|---|---|---|
| Payoff | You pay off the lease and the provider files a UCC-3 termination | You want the panels and the payment gone |
| Transfer | The provider agrees to move the agreement | You want to keep the lease |
| Subordination | Provider agrees to rank behind the new mortgage | You want the lease and first position |
The release does not file itself
Paying off the solar company does not clear the record by itself. Someone has to file the termination, and your title company should confirm it was recorded.
Provider consent, transfer paperwork, or a subordination letter can slow a closing. Those steps depend on the solar company, not on you. The practical lever is starting early.
When the filing is a mistake
A filing may also sit on title when the panels are owned or paid off. It can be expired or filed in error. In that case it may need an amendment or termination before the title company will move forward.
Keep, Buy Out, or Subordinate?
Keep the lease if the payment fits your budget and the provider will agree to the new loan. Buy it out if you want a clean title and a smaller monthly obligation. Subordinate when you want to keep the system and the provider agrees to rank behind the new mortgage. A straight transfer of the agreement is a different path, and it is rarer in a refinance of a home you already own.
| Option | Cash cost | Budget effect | Best when |
|---|---|---|---|
| Keep | None up front | Payment continues | Residual income is comfortable |
| Buy out | Payoff comes from you or proceeds | Payment ends | Residual income is tight |
| Subordinate | Little or none | Payment continues | You want to keep the system |
The buyout figure comes from the solar company, and it varies by contract. Ask for it in writing early. Because panels add no appraised value, a buyout never earns itself back in loan size. It only ever lowers your cash.
Two Borrowers, Same Roof
Picture two veterans with the same leased system. Both have the same share of equity and both want cash.
Borrower A keeps the lease. The solar payment stays in the monthly picture. The title company accepts a subordination from the provider, so the new loan takes first position. Cash-out proceeds stay whole, but residual income carries the lease payment. If the file is already close to the VA table, that can matter.
Borrower B buys it out. The payoff comes out of the proceeds, so the cash in hand is smaller. The payment disappears from the monthly budget. Residual income improves. The title shows a recorded termination, which makes the title company’s job simpler.
Neither is automatically better. The first protects cash. The second protects the monthly budget. If your residual income has room, keeping the lease may be fine. If the lease is the thing pushing your file toward the edge, the buyout may be what gets it done.
Lenders differ on how they count a lease or PPA payment, so ask your loan officer how the file will treat it. In the wholesale programs Lendmire places VA loans with, expect it to be weighed as a monthly obligation. Subject to lender guidelines and full file review, a lease payment lowers residual income, and residual income is the VA’s controlling test.
What the funding fee does to the math
The VA funding fee on a cash-out is 2.15% for first use and 3.3% for later use. It can be financed into the loan, which means it counts toward the 100% cap. Veterans receiving compensation for a service-connected disability, and the other exempt groups, are not charged. A financed fee also eats into the cash you receive. Add a lease buyout, and the proceeds shrink further.
What Should You Hand the Lender?
Gather these before you apply. Missing pieces here are the usual cause of stalls.
- The signed lease or PPA, with the payment schedule.
- Proof your payments are current.
- Any UCC-1 or fixture filing details.
- A written payoff figure, if you plan to buy out.
- A provider letter on transfer or subordination terms, if you plan to keep it.
- Your certificate of eligibility (COE). The VA’s COE decides your eligibility, and the service requirements are the VA’s rules.
If your lease is delinquent, fix that first. A late solar payment can complicate both the budget review and the provider’s willingness to cooperate.
Where the General Rule Breaks
The “no value for leased panels” rule is clear. These cases are less so:
- Unclear ownership. Fannie Mae’s solar appraisal job aid says that when ownership is unclear, no value goes to the panels unless the lender obtains a personal-property search. Expect a VA lender to be at least as careful.
- Special tax assessments. Some solar is financed through an assessment on your property tax bill. That is a different and more serious issue than a lease, because it sits on the property itself.
- Owned or financed systems. These may carry value. Hand the appraiser the paperwork.
- The prior owner signed the lease. If you bought the home with the lease in place, the transfer terms matter. Ask what you actually agreed to.
- Unusual ownership of the home. A home held in a trust adds another layer.
- Occupancy. A VA cash-out is for the home you live in as your primary residence. Occupancy decides the leverage, and a rental or second home does not follow these terms.
Why an Energy Efficient Mortgage Rarely Fits Here
The VA does allow energy improvements to be financed into a loan, including a cash-out. This is the Energy Efficient Mortgage, or EEM. The paperwork steps up with the cost. Smaller projects need a bid or cost breakdown. Mid-range projects need bids plus documentation that the added cost does not exceed the monthly energy savings, as the VA’s lender deck lays out.
That is a tool for adding improvements. It does not pay for panels directly, and the VA has no program that does. It also does not answer the question you are asking. Do not assume an EEM can fund a lease buyout. If you are weighing new, owned solar later, that is a separate conversation with your loan officer.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Common Snags and Fixes
- Slow solar provider. Ask for the payoff or subordination package at the start, not the end.
- Unrecorded release. Have the title company confirm the termination was actually filed.
- Appraiser confusion. Give the appraiser the lease so the panels are not counted as owned value. Ownership details come from the lender, not the appraiser.
- Tight residual income. Compare keeping the lease against buying it out. The decision may turn on that one number.
- A wrongly filed UCC. Ask the title company whether an amendment or termination is needed.
- Unrealistic cash-out. If you counted the panels as equity, reset expectations. They add nothing to the appraisal.
Frequently Asked Questions
Does a solar lease block a VA cash-out?
Not by itself. The lease changes the appraisal, the title review, and your budget, but a file can still move forward subject to lender guidelines and full file review. The usual work is clearing or subordinating the provider’s filing and showing the payment fits your residual income.
Is a PPA treated differently from a lease?
For appraisal, the treatment is the same: no value for leased or PPA systems. The payment differs in form, since you pay for energy produced rather than a flat monthly amount. Lenders review the terms of each agreement, so give your loan officer the full contract.
Will the panels add to my appraised value?
No, if they are leased or under a PPA. The VA gives leased solar no value, so your cash-out is sized on a value without them. An owned system may be treated differently, and the paperwork decides it.
Do I have to pay off the lease?
Not always. You can pay it off, transfer it, or have the provider subordinate its interest so the new VA loan stays first. The title company decides which path the filing requires. Whichever you pick, a payoff or termination needs to be recorded.
Can I keep the lease and still reach 100% of value?
The new loan can go to 100% of the appraised value, including a financed funding fee, in the wholesale programs Lendmire places VA loans with. The lease does not change that cap. It changes the value you are measured against and your monthly budget.
Next Steps
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. Bring the solar agreement along. It is the one document that shapes the rest of the file. Lendmire is a mortgage broker arranging these loans through wholesale lenders, and every program figure here is subject to lender guidelines and is not a commitment to lend.
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.
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References
1. VA Lenders Handbook Chapter 12 Transmittal (Change 29)
2. VA, Energy Efficiency & VA Home Loans (lender conference deck)
3. Fannie Mae Selling Guide B4-1.3-05
5. Skyline Title Support, solar UCC liens
6. Fannie Mae, Appraising properties with solar panels
This article is part of Lendmire’s VA Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Can You Get a VA Cash-Out on a Fourplex With the Other Units Leased? · Can You Get a VA Cash-Out on a Condo in Litigation? · Can a Condo Without VA Project Approval Get a VA Cash-Out?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.