The Quick Read: A new, larger first mortgage can pay off your solar loan at closing, and the lender treats that new loan as cash-out or, in a few cases, limited cash-out. Three things decide how it goes: how the system is owned, what is recorded against your property, and how much equity you hold. On a one-unit home you live in, the standard cash-out route reaches 80% loan-to-value (the loan as a share of your home’s value). Some government loans cannot do this at all.
Key Takeaways
- A solar loan secured by the panels or the home can usually be paid off from the proceeds of a new first mortgage. A lease or power purchase agreement has no loan to pay off.
- The new loan must cover the old mortgage, the solar payoff and closing costs within the leverage cap. Equity is the limiting factor.
- An FHA Streamline and a VA IRRRL generally cannot pay off a solar loan. Those borrowers need a cash-out refinance within their own program.
- A recorded lien on the panels has to be cleared or ranked behind the new mortgage. Ask for the payoff statement and a title search early.
- Moving a short solar balance into a 30-year mortgage can lower the monthly bill and raise total interest. Know the trade before you sign.
Key Terms Defined
Cash-out refinance: A new first mortgage that pays off your old one and can put cash in your hands or pay off other debts. A conventional one on a one-unit primary home goes up to 80% loan-to-value.
Limited cash-out refinance: A refinance meant to change your loan’s terms, not to raise cash. Only small, specific payoffs and incidental cash back are allowed.
UCC-1 lien: A public filing a solar lender may record to claim the panels as collateral. It is meant to cover the equipment, but some places treat it as reaching the property.
PACE loan: A solar or energy loan repaid through your property tax bill. It can rank ahead of your mortgage.
Subordination: A signed agreement in which one lienholder agrees to rank behind another. Here, the solar lender steps behind your new mortgage.
Seasoning: The waiting period a lender wants before a refinance. For a cash-out, the mortgage being paid off must be at least 12 months old, and a borrower must have been on title for 6 months.
Payoff statement: A written figure from the solar lender showing what it takes to close the loan on a given date.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, 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 cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the 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.
How Does the Roll-In Work?
The new mortgage replaces your current first mortgage and also sends a check to the solar lender. You are left with one loan and one payment. The solar balance stops existing as a separate debt.
Lenders call this a cash-out refinance even if little or no cash reaches you. The solar payoff is money leaving the loan for something other than your old mortgage. That classification sets the leverage cap and the file rules. Across the wholesale programs Lendmire places files with, the standard conventional cash-out tops out at 80% loan-to-value on a one-unit primary home. It is 75% on two- to four-unit primary homes. See Lendmire’s cash-out refinance programs page for how those limits sit beside the other refinance lanes.
Here is the equity test in plain terms. Add your current mortgage balance, your solar payoff and your closing costs. That total, as a share of your appraised value, must fit under the cap. If it does not, the refinance does not work as drawn.
Picture a homeowner whose mortgage is about 60% of value and whose solar payoff is about 5% of value. Together they sit at 65%, with closing costs on top. That leaves room under 80%.
Now picture a homeowner at 76% on the mortgage with a solar balance worth 6% of value. The total is 82% before costs. Over the cap. (These are modeled examples, not market data.) That second homeowner has a few options, covered below.
How Is the File Underwritten, Step by Step?
The underwriting follows a set order. Here is how it plays out.
1. Identify the solar instrument. Gather the contract. Is it a cash purchase, a secured loan, an unsecured loan, a lease, a power purchase agreement or a tax-bill assessment? Everything else depends on this.
2. Get the payoff statement. Request it from the solar lender. Ask whether prepayment or early-termination charges apply. Dealer fees and charges can make the payoff higher than the balance on your monthly statement.
3. Search the title. The title company looks for a UCC-1 filing or a PACE assessment. It searches the records where such filings are made. You do not need to know which office holds it, but you do need to ask.
4. Pick the loan type. The lender decides whether the solar payoff fits a limited cash-out exception or a full cash-out. More on that below.
5. Run the numbers. The new payment must fit your income. Your credit score and total debt ratio are reviewed. Most wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a total ratio ceiling of 50%. Programs vary and every file gets a full review.
6. Appraise. The appraiser needs accurate information on how the panels are owned and financed. That affects whether they count toward value.
7. Close. The settlement agent pays the solar lender directly. The solar lender then releases or terminates its filing. Confirm that it happened.
Paying off the solar debt at closing also removes its payment from your debt ratio. That is one reason this refinance can help borrowers who are stretched.
What Kind of Solar Financing Do You Have?
The answer changes everything. Fannie Mae’s Selling Guide names four structures: owned, leased, separately financed, and power purchase agreement. Add PACE, which sits outside those four, and you have the full menu.
| Structure | Can the refinance pay it off? | What the lender checks |
|---|---|---|
| Secured solar loan | Yes | Payoff statement, UCC-1 filing |
| Unsecured solar loan | Yes | Payoff statement |
| PACE assessment | Yes, and often required | Tax-bill lien, equity available |
| Lease or power purchase agreement | No loan to pay off | Contract terms, payment in debt ratio |
| Paid-off or cash-bought panels | Nothing to pay | Standard ownership and insurance |
The Consumer Financial Protection Bureau describes secured solar loans as typically backed by a lien on the panels, and unsecured loans as having no such lien. It also notes that solar loan terms commonly run from 8 to 25 years, while industry data show repayment typically in 7 to 9 years because of early payoffs. So your real remaining balance may be smaller than the original term suggests. Ask for it.
Cash-Out or Limited Cash-Out?
Fannie Mae’s rules for a limited cash-out refinance normally allow only purchase-money liens to be paid off. There is a named exception: a PACE loan, or other debt used solely for energy-related improvements, may be paid off. Solar fits that description when the loan funded panels and nothing else.
Why does this matter? A limited cash-out refinance has a higher leverage ceiling than a cash-out. On a one-unit primary home, rate-and-term loans in the wholesale programs reach 95% loan-to-value, and 97% in a few cases where the existing loan is agency-owned and a first-time-buyer program applies. Cash back is held to a small cap.
If the solar loan meets the energy-only test and the lender reads the rule that way, the file could be structured as limited cash-out. That keeps leverage inside a higher cap. It is not automatic. Each lender applies the agency rule and its own overlays, and eligibility depends on a full file review.
A few more details:
- Mortgage insurance: Above 80% loan-to-value, mortgage insurance applies. You can ask to cancel it at 80% of the original value with a good payment history and no subordinate liens. The servicer must end it automatically at 78%. For the mechanics of the premium itself, see Lendmire’s piece Can You Roll Mortgage Insurance Into a Cash-Out Refinance Loan Balance?.
- The no-mortgage-insurance lane: One wholesale lane reaches 89.99% loan-to-value with no mortgage insurance. It requires a 680 score, a 50% ratio, a 30-year fixed rate, a primary residence, a conforming balance and its own six months of seasoning. It is not written everywhere. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, and that lane is not written there.
- Jumbo balances: Above the conforming limit, jumbo lanes take over. They start at a 660 decision score and can reach 90% leverage on certain programs. Leverage and reserves vary by lender and program; the final terms follow the full file review.
Freddie Mac’s treatment differs from Fannie Mae’s. Do not assume one program’s exception works in the other. Freddie Mac’s cash-out rules have their own occupancy, title and seasoning tests.
Where Does the General Rule Break?
Most of these edge cases come down to the loan type or the paperwork.
FHA Streamline. This lane works only when the existing loan is FHA and current. It asks for a net tangible benefit. HUD’s Streamline page says cash in excess of $500 may not be taken out, and closing costs cannot be rolled into the loan amount. A solar payoff does not fit. An FHA borrower with solar debt needs an FHA cash-out or no-cash-out refinance, which requires an appraisal. The FHA rate-and-term lane reaches 97.75% with an appraisal.
VA IRRRL. The streamline is built to pay off the existing VA loan and the cost of the refinance. It carries a 0.5% funding fee unless exempt, no VA appraisal and a seasoning rule. A veteran who wants a solar loan paid off generally needs a VA cash-out refinance instead. The IRRRL allows a limited reimbursement for energy improvements, but that is not the same as paying off an existing solar loan. Check the current VA rules before relying on that exception.
PACE. Because it sits on the tax bill and can outrank your mortgage, lenders treat it seriously. Fannie Mae’s PACE rules require payoff as a condition of a new loan when equity is enough, and a property with an unpaid PACE loan at closing is not eligible for delivery to Fannie Mae. Plan to clear it in the refinance. If equity is too thin to pay it off, ask your lender whether the file fits another program, because a PACE balance left in place is a serious obstacle. The CFPB’s PACE rulemaking cited a study sample where PACE borrowers saw sharply higher property tax bills and were more likely to fall behind on their first mortgage. Those are the study’s findings, not a national average.
A lien that reaches too far. A UCC-1 is meant to attach to the panels. Freddie Mac’s solar FAQ says that if a jurisdiction treats it as a general lien on the real estate, it must be released or subordinated. An amended filing narrowed to the equipment is acceptable. Some programs now also accept a title endorsement for solar panels. Your title company and lender decide which fix applies.
A loan that funded more than solar. If the same loan also paid for a roof or other non-energy work, the energy-only exception may not apply cleanly. Ask the solar company what the loan covered.
Leases and power purchase agreements. There is no payoff. Your options are buying out the contract, keeping it with the solar company’s signed consent, or getting a subordination-type letter with the foreclosure-protection language the lender requires. The lease payment generally counts in your debt ratio. Leased panels generally are not counted as an owned feature in the appraisal.
A young first mortgage. The loan being paid off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for six months. A few exceptions exist, such as delayed financing, inheritance and legal awards. If you bought recently with the solar loan, check both clocks.
Second homes. The same cash-out mechanics apply, but occupancy decides leverage. The cash-out ceiling is 75% on a second home.
Is It a Good Idea for You?
Do the math before you sign anything. Three trade-offs matter most.
Term stretch. A solar loan that was going to be gone in a handful of years becomes part of a 30-year mortgage. The monthly bill can drop. Total interest can rise. If you can pay extra toward principal on the new loan, you keep the benefit and shrink the cost. Few borrowers actually do it, but you can.
The mortgage you give up. If your current mortgage has terms you like, replacing it just to absorb a solar balance means everything resets. Compare the old loan’s balance and remaining term against the new one. Only you can judge whether that trade makes sense. Lendmire’s role is to line up the programs so you can see it side by side.
Closing costs. A refinance has costs, and they can be added to the new balance. Some marketing talks about a “no-cost” refinance, but the costs are still there. They are built into the rate or the balance. Divide the costs by the monthly savings to find your break-even point. If you may move or refinance again before that point, the math fails.
When it fits: you have strong equity, the solar balance is a small part of the new loan, the lien is clean and you plan to stay put. When it does not: your equity is thin, your current mortgage terms are strong and the solar loan is nearly paid off. Then a small prepayment can be the better move.
If you also carry auto, card or personal loans, the same cash-out can absorb them. Lendmire’s piece on whether a cash-out refinance can roll auto, card and personal loans into one covers how that works and what to watch.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Next Steps
Start with three documents: the solar contract, a current payoff statement and your latest mortgage statement. Then ask the solar company whether a lien is recorded and who will release it. 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 is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
After closing, confirm the solar loan account shows paid in full. Make sure the lien filing was terminated. Update your system monitoring and warranty records.
Frequently Asked Questions
Will the solar company cooperate at closing?
Usually, once it receives full payoff. The trouble comes when a company is slow to supply the payoff statement or release a lien. Ask for the statement early, and have the title company track the release. If the lien reaches the whole property and the solar lender will not subordinate, the refinance can stall.
Do I get cash back if I only pay off the solar loan?
Possibly a little. Under the limited cash-out route, cash back is held to a small cap. Under a full cash-out, you can take more, up to the leverage ceiling. Either way, the payoff comes out of the new loan first.
Can I roll a solar lease into a refinance?
Not as a payoff, because a lease has no loan balance. You can buy out the contract with your own money or with cash-out proceeds, then own the panels. Otherwise the lease stays in place and its payment counts in your debt ratio.
Does the system have to be working?
Lenders and appraisers want accurate information on ownership and financing. A system that was never turned on, or one that is disputed, can complicate the appraisal and the payoff. Sort that out with the solar company before you apply.
Does paying off the solar loan affect any tax credit I claimed?
That is a tax question, not a lending one, and the mortgage file does not settle it. Paying off a solar loan is a financing step, and the loan documents do not say whether it changes a credit you already claimed. Bring your solar contract and your tax filings to that conversation before you close.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide: Special Property Eligibility Considerations
2. CFPB Issue Spotlight: Solar Financing
3. Fannie Mae Selling Guide: Limited Cash-Out Refinance Transactions
4. Freddie Mac Guide 4301.5: Cash-Out Refinance
5. HUD Single Family Streamline Refinance
6. Freddie Mac Solar Panel FAQ
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Get a Cash-Out Refinance After Buying a Home With Cash · How to Take a Cash-Out Refinance From Application to Closing · How to Choose a Cash-Out Refinance Over a Personal Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.