The Quick Read: It depends on how much cash you have and what kind of solar debt sits on your home. Paying the lien off first, before you refinance, keeps your title clean, but it drains savings. Rolling the payoff into a VA cash-out preserves cash today, though you finance a bigger balance plus a funding fee, and the payoff reduces the cash you receive. Either way, the VA loan must end up in first-lien position.
Here is the honest sorting. If you want the cash kept liquid, have equity, and the lien can be cleared at closing, a VA cash-out can retire it for you. And if you only want the solar payment gone, you may not need a cash-out at all.
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: 7.18% as of November 5, 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.
Lendmire’s VA cash-out refinance program page covers the program basics. This article covers the solar piece.
Side-by-Side
| Factor | VA Cash-Out Pays Solar Lien | Pay Lien First, Then Refinance |
|---|---|---|
| Leverage | Up to 100% of appraised value, fee included | Same ceiling, after payoff |
| Credit floor | 580 decision score on wholesale programs | Same |
| Mortgage insurance | None | None |
| Documentation | Full underwriting plus lien payoff | Full underwriting plus proof of release |
| Funding fee | Applies to the larger balance | Applies to the new loan |
| Cash you receive | Reduced by the payoff | Not reduced |
| Where the savings go | Stay in your account | Spent on the solar balance |
Every figure is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
First, What Kind of Solar Debt Do You Have?
The lien type decides almost everything. “Solar debt” is not one thing.
- Secured solar loan. The solar company usually files a UCC-1, a state filing against the panels. The CFPB’s solar financing report says lenders commonly file UCC liens on the panels themselves. It also says some jurisdictions treat that lien as reaching the whole property. If so, it must be released or subordinated to the new mortgage.
- Fixture filing. This is a UCC-1 recorded in county land records. It shows up on a title search. It is the version most likely to block first-lien position.
- Unsecured solar loan. No lien at all. It is just debt, and the underwriter counts the payment.
- Lease or PPA. The provider typically files a UCC-1 to show it owns the system. There is no loan balance to pay off. Your options are a buyout, provider consent, or leaving it as is.
- PACE assessment. Repaid through your property tax bill and usually ranked ahead of mortgages. It is the hardest case, covered below.
Pull your solar paperwork and ask the company which one you have. Then ask your loan officer to confirm it against a title search at both the state and county level.
Why the First-Lien Rule Drives Everything
A VA loan must be secured by a first lien. The statute sits at 38 U.S.C. § 3703(d)(3)(A), and VA Circular 26-16-18 says lenders are responsible for securing that position. The VA Lenders Handbook adds that other lienholders must agree to subordinate to the VA loan.
So any solar lien that clouds the title has three possible outcomes:
1. It gets paid off.
2. It gets released.
3. The solar company agrees to subordinate.
The third is possible, not assured. A solar company has no obligation to cooperate on your timeline.
When a VA Cash-Out Is the Better Fit
A VA cash-out can refinance loans of any type into a VA loan, and it can also pay off liens. The VA Lenders Handbook, Chapter 6 names a mechanics lien and a second mortgage as examples. Across the wholesale programs we place VA files with, the cash-out reaches up to 100% of appraised value including the financed funding fee, with no mortgage insurance.
This route tends to fit when:
- You have solid equity and little spare cash. The payoff comes out of proceeds, so you keep your savings.
- You want other debt cleaned up too. A cash-out can retire the solar balance, a second mortgage, and other liens in one transaction.
- The lien is a standard secured loan. A payoff plus a UCC-3 termination statement normally clears it.
- Your existing loan is not VA. A VA cash-out also moves a conventional or FHA loan into the VA program.
- Your residual income is healthy. Residual income, the money left each month after major obligations and living costs, is the controlling VA test. A larger balance with no separate solar payment can help or hurt it, depending on the numbers.
Know the tradeoffs. The payoff reduces the cash you walk away with. You finance the payoff, so the funding fee applies to a bigger balance. The funding fee runs 2.15% for first use and 3.3% for subsequent use on a cash-out, waived for exempt veterans, such as those receiving compensation for a service-connected disability. Full credit underwriting applies to every VA cash-out. Seasoning and a net tangible benefit also apply, and the benefit must be one of VA’s eight listed benefits. The rate-reduction and fee-recoupment tests belong to the IRRRL, not the cash-out.
One more point: the handbook describes a Type II cash-out as a loan where the new amount, fee included, exceeds the payoff of the liens being refinanced. A solar payoff plus extra cash lands you there. You also need enough available entitlement, which a loan officer can confirm from your certificate of eligibility.
When Paying the Lien First Is the Better Fit
Pay first when you have the cash and the lien is the sticking point.
- The lien is a fixture filing or sits on title. Clearing it up front means the title search shows no competing claim.
- You want maximum cash from the refinance. Nothing is deducted from proceeds.
- The solar balance is small relative to your savings. Financing a modest balance through a long mortgage may cost more over time than writing a check.
- The solar company is slow or uncooperative. A recorded UCC-3 termination is easier to prove before the file is built around it.
- You are not sure you want a cash-out at all. If the only goal is to end the solar payment, paying it off may be the whole job.
The cost is liquidity. Cash spent on solar is cash you cannot use for repairs or emergencies. Think about that before draining the account to avoid a bigger loan balance.
Payoff alone does not erase the filing. Bennett Legal explains how an unreleased filing can derail a sale or refinance.
The Hard Case: PACE
PACE is different from a solar loan. It is repaid through your tax bill and usually takes priority over mortgages. VA Circular 26-16-18 set conditions for PACE on VA-guaranteed loans back in 2016. Policy can change, so check current VA policy with your loan officer before assuming anything.
Expect a PACE assessment to need resolving before or at closing. For context only, the conventional market’s Fannie Mae Selling Guide generally will not buy loans with a priority PACE lien. That is not VA policy, but it shows how the wider market treats it.
The CFPB also now treats PACE as credit with ability-to-repay requirements, per its rule summary. In practice, an existing PACE payment counts against you in underwriting.
Two Things to Settle Before Choosing
What does an IRRRL do here? Nothing for solar. The IRRRL refinances only your existing VA loan and cannot absorb other liens. If a solar balance is the goal, the cash-out is the VA route.
How will the appraisal treat the panels? I found no VA page setting a solar-specific valuation rule. Conventional guidelines exclude leased or PPA panels from value, but that is not a VA rule. Do not assume panels add dollar-for-dollar value. Ask the loan officer how ownership structure affects the appraisal.
A separate VA program, the Energy Efficient Mortgage, finances new improvements, up to $6,000 under the VA Buyer’s Guide. It is for adding solar, not retiring existing solar debt.
A Balanced Verdict
Neither option wins by default. Think of it as a sequence question.
Choose the cash-out route if you have equity, want to protect savings, and your lien can be paid at closing. Choose pay-first if your lien clouds title, your savings can absorb it, or you want every dollar of proceeds.
A quick test: if clearing the lien would leave you short on emergency cash, lean toward the cash-out. If you carry a lease or PPA, neither may be needed, because there may be nothing to pay off.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
UCC-1: A filing that tells the world a creditor or owner has a claim on equipment, such as solar panels.
UCC-3: The termination statement that removes a UCC-1 after the debt is paid.
Fixture filing: A UCC-1 recorded in county land records, so it appears on a title search.
PACE: A clean-energy assessment repaid through your property tax bill, usually ahead of the mortgage.
Subordination: An agreement by a lienholder to rank behind the new mortgage.
Residual income: The money left each month after major obligations and living costs, the controlling VA underwriting test.
Type II cash-out: A VA cash-out where the new loan, funding fee included, exceeds the liens being paid off.
Frequently Asked Questions
Can a VA cash-out refinance pay off my solar loan?
Yes, in most cases when the lender can clear the lien and the file passes full underwriting. The VA Lenders Handbook lets a cash-out refinance other recorded liens. The payoff reduces the cash you receive. Eligibility is subject to lender guidelines and file review.
Can an IRRRL include my solar balance?
No. An IRRRL refinances only your existing VA loan and cannot pay off other liens. If you want the solar balance retired through a VA refinance, the cash-out is the route.
Does paying off the solar loan remove the lien filing?
Not automatically. A UCC-3 termination statement is normally filed to end the UCC-1. Ask for proof of filing, and make sure the title search shows it cleared.
What if I have a solar lease or PPA?
There is typically no loan balance to pay off. The provider usually files a UCC-1 as a notice of ownership. Options include a buyout, provider consent, or leaving it in place, and treatment varies by lender and provider.
Does a larger VA loan balance hurt my chances?
It can change your numbers, since residual income decides the file. Removing a separate solar payment may help, while a bigger balance may offset it. A loan officer can run both versions.
Next Step
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. Call 828-256-2183 or request a quote.
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 Issue Spotlight: Solar Financing
3. VA Lenders Handbook, Chapter 6
6. CFPB PACE rule executive summary
7. VA Home Loan Guaranty Buyer’s Guide
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: How to Qualify and Apply for a VA Cash-Out Refinance With an Old Appraisal · How to Get a VA Cash-Out Refinance With an Unpermitted Addition · VA Cash-Out Refinance vs Conventional Cash-Out on Closing Costs
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.