The Quick Read: Usually, yes, with conditions. Neither a solar lien nor an unpermitted addition automatically disqualifies a VA cash-out refinance. What matters is the type of lien and the condition of the addition. A property-tax-style solar assessment (PACE) is the hard case, and it is usually paid off inside the loan. An unpermitted space is judged on zoning, safety, soundness and marketability, and either problem can shrink the cash you walk away with. Final eligibility is subject to lender guidelines and full file review.
What Counts as a “Solar Lien”?
Four different things get called a solar lien, and they are not treated the same way. Lumping them together is a common reason borrowers get bad advice.
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: 7.24% as of October 29, 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.
| Solar structure | What shows up | Usual path on a VA cash-out |
|---|---|---|
| PACE assessment | Tax lien on the property | Paid off in the transaction, or must meet VA conditions |
| UCC-1 equipment filing | Filing against the panels | Release or subordination if treated as a lien on the real estate |
| Recorded solar deed of trust | True junior lien | Paid off or subordinated per lender and title |
| Lease or PPA | Contract, sometimes a filing | Lender and title review the documents |
A PACE assessment is a tax assessment attached to the property, not to the person. It is repaid through property taxes and stays with the home on transfer, as the CFPB’s proposed-rule release describes it. A UCC-1 is a different instrument. Freddie Mac’s solar panel FAQ says it is meant to create a lien on identified equipment, not the whole property. If a jurisdiction treats it as a lien on the real estate, the filing has to be released or subordinated. That is a conventional-loan source. It shows how title companies and the secondary market think, not what VA mandates.
Here is the catch for leases and PPAs: the VA sources reviewed for this article do not address ordinary solar loans, leases or PPAs. Treat the answer as lender and title-company practice, not a VA rule.
What Does VA Say About PACE Liens?
VA requires its guaranteed loan to sit in first position. VA Circular 26-16-18 cites the statute behind that rule and sets conditions for lenders closing on PACE properties. A PACE lien may be ahead of the VA loan only for delinquent regular assessments, not for the full PACE balance. The PACE obligation also has to be readily apparent in the public records.
In practice, a PACE lien that takes priority over the new mortgage is a problem, and the common fix is to pay it off in the transaction. PACE priority also differs by state. Conventional programs are stricter. Fannie Mae’s selling guide tells lenders to monitor state and local law on priority. VA is more permissive than conventional when the circular’s conditions are met, but individual lenders add their own overlays.
Does an Unpermitted Addition Kill the Loan?
No. “Unpermitted” is not itself a VA disqualifier. The test is whether the space is zoning-legal, safe, sound and marketable.
The VA Lenders Handbook Chapter 12 overview says the property must comply with applicable zoning. If it does not comply but the local authority accepts it, the appraiser reports it as “Legal Non-Conforming” and comments on marketability and any effect on value. A home with business use is allowed only if it is primarily residential, has no more than one business unit, and is legally zoned. The underlying rules sit in 38 CFR 36.4351 and 36.4527(c)(4).
One caution. The primary VA sources reviewed here do not state a sentence saying permits are not required. The Handbook’s tests are zoning compliance, Minimum Property Requirements and appraiser comments. Anything beyond that is lender practice.
Unpermitted space can be valued separately, or not counted at all. No primary source gives a figure for how much value it receives. It is an appraiser judgment. Zoning risk matters too: fines, a required permit or demolition risk can change how a lender sees the file.
How the VA Cash-Out Process Handles Both Problems
Think of the file as a series of checkpoints.
1. Eligibility. VA’s cash-out page lists a Certificate of Eligibility, VA and lender standards for credit and income, and living in the home being refinanced. The loan goes through a private lender, not VA directly. A second home or investment property is outside this program.
2. Appraisal. An appraisal is mandatory on a cash-out. VA’s Buyer’s Guide says the appraiser gives an opinion of value and reports whether the home meets the minimum property requirements. It is not a home inspection. The result is a Notice of Value, which can list repairs.
3. Title and lien search. A PACE assessment shows up on the tax roll and in public records. A UCC-1 or recorded solar deed of trust shows up in the title work.
4. Payoff or subordination. Solar payoff documents typically include a payoff letter and, for a UCC-1, a termination filing (a UCC-3). That is common industry practice, not something found in a VA document.
5. Repairs and conditions. Items on the Notice of Value must be cured or waived. VA Circular 26-18-7 says the minimum property requirements must be met before the guaranty certificate is issued.
6. Cash-out paperwork. VA’s cash-out quick reference lists cash-out compliance disclosures and a net tangible benefit requirement.
On the files Lendmire arranges through wholesale lenders, the stall point is rarely the VA rule. It is the title commitment. A filing nobody noticed shows up late, and the payoff or subordination request starts after the appraisal is already done. Ordering a lien search early keeps the sequence clean.
How Do These Problems Change Your Cash?
Each problem pulls from a different place.
| Issue | What happens | Effect on proceeds |
|---|---|---|
| Solar payoff | Balance paid from loan proceeds | Less cash to you |
| PACE payoff | Paid at closing to clear priority | Less cash to you |
| Subordinated filing | Stays in place, lender agrees | Little direct effect |
| Excluded or discounted addition | Appraiser may not count the space | Lower value, lower proceeds |
Two points matter. First, the VA cash-out reaches up to 100% of the appraised value, including the financed funding fee, across the wholesale programs Lendmire places VA loans with. Any payoff comes out of that equity. Second, because the cap is tied to appraised value, a lower appraisal from an unpermitted space reduces the amount available.
Picture a homeowner with a paid-down VA loan, a financed solar system and a converted garage. The appraiser counts the garage conversion at a discount. The solar balance is paid at closing. The result is less cash than the equity first suggested. Run the math on both before committing to a cash-out for a specific purpose.
The monthly budget changes too. Paying off solar or PACE inside the refinance swaps that payment for a larger mortgage payment. The CFPB’s final PACE rule release found that PACE loans raised property taxes substantially and that PACE borrowers were more likely to fall behind on their first mortgage. It also noted that most PACE borrowers qualified for cheaper financing.
What If Both Problems Are on the Same File?
Fix the lien question first. A first-position problem can stop the loan outright, while an addition problem usually changes value. Run the sequence this way: title search, payoff or subordination request, appraisal, permit decisions, then closing. If a filing surfaces late, the appraisal may need to be reviewed again once the lien is resolved.
Lendmire’s VA cash-out refinance program page covers the basics of the product.
Document Checklist
Solar side:
- The solar contract, loan or lease agreement
- A payoff letter, or a subordination request
- A termination filing if a UCC-1 is recorded
- Proof of whether the panels are owned, financed or leased
Permit side:
- Permit history from the local building department
- Any waiver or acknowledgment paperwork the lender requires
- Photos and a description of the added space
- Evidence of zoning status
Should You Do the Cash-Out at All?
Sometimes not. If equity is thin, a payoff plus a lower appraisal can leave little cash. If the addition could draw a fine or a required permit, fixing that first may be cleaner. A streamline does not solve this. The IRRRL refinances an existing VA loan with no VA appraisal, and streamlines generally do not deliver cash. It also does not use the same value test the cash-out does.
| If this is true | Then consider |
|---|---|
| PACE lien, ample equity | Cash-out with payoff |
| UCC-1 only, panels owned | Release or subordination |
| Addition fails zoning or safety | Fix or permit first |
| Thin equity after payoffs | Keep the current loan |
Key Terms Defined
PACE: A property-tax-style assessment used to finance energy upgrades, repaid through property taxes.
UCC-1: A filing that gives a creditor a claim on specific equipment, such as solar panels.
Subordination: An agreement that moves a lien behind the new first mortgage.
Notice of Value: The appraisal result VA issues, listing value and any required repairs.
Legal non-conforming: A property feature that does not meet current zoning but is accepted by the local authority.
Net tangible benefit: A VA test that the refinance must provide a real, listed benefit to the borrower.
What Program Limits Apply?
The VA cash-out refinances any loan type into VA and reaches 100% of the appraised value, including the financed fee. It carries seasoning and a net tangible benefit. The half-percent rate-reduction and fee-recoupment tests are IRRRL rules and do not apply to the cash-out. The funding fee on a cash-out is 2.15% for first use and 3.3% after, and it is waived for veterans receiving compensation for a service-connected disability and other exempt groups. The wholesale programs Lendmire places VA loans with start at a 580 decision score, with residual income as the controlling test. A 41% debt-to-income ratio is a guideline, not a cap. All of this is subject to lender guidelines and full file review.
Frequently Asked Questions
Does a solar lien disqualify me from a VA cash-out?
Not automatically. A PACE assessment is the hard case and is usually paid off in the transaction. A UCC-1 on equipment is often released or subordinated, depending on how the title company treats it.
Does the solar payoff come out of my cash?
Yes. Any balance paid from loan proceeds reduces the cash you receive, because the total is capped by the appraised value.
Can I cash out with an unpermitted room?
Often, yes. The test is zoning legality, safety, soundness and marketability. The appraiser may discount or exclude the space, which lowers the value and the proceeds.
Will the appraiser count my solar panels?
No VA source reviewed here says how panels are valued. Treatment can differ for owned, financed and leased systems, and it is an appraiser and lender judgment.
Can I use a streamline instead?
Not to take cash. A streamline refinances an existing VA loan with no VA appraisal and generally does not deliver cash. Taking equity out requires the cash-out product.
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. Program figures are subject to lender guidelines, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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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. CFPB proposed PACE rule release
2. Freddie Mac Solar Panel FAQ
3. VA Circular 26-16-18 (PACE)
5. VA Lenders Handbook Chapter 12 overview
9. VA Cash-Out Quick Reference
10. CFPB final PACE rule release
This article is part of Lendmire’s VA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: VA Cash-Out Refinance Requirements for Eligible Veterans · Can a VA Cash-Out Rely on Electronic Verification Alone? · Can You Do a VA Cash-Out Right After a Purchase or IRRRL?
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.