The Quick Read: Very few lenders will open an equity line on a rental that carries a PACE assessment, and the ones that do almost always want it paid off and released first. A PACE assessment is repaid through the property tax bill and ranks ahead of a new line. That ranking is why lenders balk.
- Investment-property equity lines are a thin market on their own, and a PACE assessment narrows it further.
- The usual path is payoff plus a recorded release, then the line application.
- On Lendmire’s network, an investment line tops out at 70% combined loan-to-value (CLTV), with a 700 credit minimum and a $500,000 maximum line.
- A rental held in an LLC cannot use these lines at all. A DSCR cash-out refinance is the usual alternative.
- The best path for your situation depends on equity, credit, how the property is titled, and the size of the assessment.
What a PACE Assessment Is and Why It Gets in the Way
PACE stands for Property Assessed Clean Energy. It is financing for energy upgrades such as solar panels, windows, or HVAC. The money is not secured by a mortgage. It is repaid as an assessment added to the property’s tax bill, often over a decade or two.
How large a line the equity supports.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 90% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
Two features matter to any new lender.
The assessment follows the property, not the person. If you sell, the obligation stays with the building. If you buy a rental, you can inherit someone else’s assessment.
It usually ranks ahead of private liens. Because it is collected like a tax, it generally sits in front of earlier mortgages and any new line. A lender opening a line behind it knows its collateral sits behind a claim it cannot control.
That is the whole problem in two sentences. Lenders do not dislike solar. They dislike being second to a tax-style claim they cannot negotiate with.
Who Writes Investment HELOCs at All?
Investment-property equity lines are hard to find even without PACE. NerdWallet reports that qualifying is harder than on a primary home because lenders see higher default risk. Availability varies by lender.
In practice, the lender types look like this:
- Big banks and large retail lenders. Many are inconsistent about rental lines or avoid them.
- Community banks, credit unions, and portfolio lenders. These institutions keep loans on their own books, so they have more room to make exceptions. Rules differ lender to lender.
- Wholesale lenders reached through a broker. A broker places the file with a lender whose guidelines match the property and borrower.
Nobody publishes a reliable list of which institutions accept a PACE assessment. Any page that claims one is guessing. Acceptance depends on the lender’s current guidelines, the state, and the size of the assessment.
That is where a broker helps. Lendmire is a broker, not a lender. It arranges home equity lines through select wholesale lenders in its network and matches the file to the program. The best lender for your file depends on property type, credit, leverage, and how the title is held.
What the Network’s Investment Line Looks Like
Here is how investment lines work across the wholesale network Lendmire places files with. All figures are typical ranges, subject to lender guidelines and full file review. They are not a commitment to lend.
- Leverage. The ceiling on an investment line is 70% CLTV. That is first mortgage plus the new line, measured against value. Credit scores of 720 and 700 both reach that same 70%, so a higher score buys eligibility, not extra leverage.
- Credit. The minimum on an investment line is 700. There is no tier beneath it.
- Size. The maximum line on an investment property is $500,000. Lines above that size are for primary residences only.
- Structure. The line runs a five-year interest-only draw, then a 25-year fully amortizing repayment. The pricing floats and never converts to fixed. At least 75% of the line is drawn at closing.
- Valuation. Because the line is capped at $500,000, it normally uses an automated valuation instead of a traditional appraisal. A borrower can still request a full appraisal.
- Debt-to-income. The maximum is 50%, qualified on the interest-only payment at the maximum draw.
- Properties. Single-family, 2-4 units, townhomes, PUDs, and condos, including non-warrantable condos, are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not.
- Exposure. A borrower is limited to three lines. A borrower with more than 15 financed properties is not eligible.
- Availability. Lendmire’s equity-line placements cover its 16 full-service states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA. That is narrower than its DSCR loan footprint of 41 markets, including Washington, D.C.
One more item catches many investors. The line must be titled in your personal name or a revocable living trust. Rentals owned by LLCs, corporations, partnerships, or irrevocable, blind, or land trusts cannot hold title on these lines. A DSCR cash-out refinance, covered below, handles that case.
How Underwriting Treats the Assessment, Step by Step
Here is the sequence a lender actually follows when a PACE assessment is on the property.
Step 1: The lender finds it. The assessment shows up on the tax bill and in county tax records. It does not appear in the mortgage records, because it is not a mortgage. A title or lien search is how it gets caught. The CFPB defines PACE as financing for home improvements that results in a tax assessment on the property.
Step 2: The lender checks priority. Priority comes from state and local program design, not from the label “PACE.” The FHFA describes PACE liens that rank ahead of an existing first mortgage and says that threatens the lien position of mortgage lenders. The same statement notes some PACE programs are structured behind the first mortgage. Your assessment may be either type.
Step 3: The lender decides what to do. There are three typical outcomes:
1. Require payoff and proof of release before the line closes.
2. Decline the file.
3. In rare cases, accept a consent or subordination arrangement.
Option one is by far the cleanest to plan around. Assume payoff unless a specific lender tells you otherwise.
Step 4: The lender decides whether the balance counts toward CLTV. If the assessment stays, plan on it counting against the 70% cap alongside your first mortgage. If it is paid off and released before closing, it drops out of the stack.
Step 5: The release is recorded. The assessment is cleared by payoff and a release from the taxing authority. Releasing a mortgage or filing a UCC-3 termination does not clear it. A UCC-3 clears a recorded UCC filing, which is how some solar financing is secured. That is a different instrument.
A federal rule now governs how PACE financing is originated. It adds ability-to-repay and disclosure requirements for PACE originators. It does not change lien priority or remove assessments already on a property. As Orrick summarizes, the rule adds disclosure and ability-to-repay coverage. Your existing assessment still gets cleared the old way.
The Equity Math With an Assessment on the Property
Run the numbers as percentages of the property’s value. This example is illustrative, not a market figure.
Say your first mortgage is 45% of value and the PACE balance is 5%. Together that is 50%. The investment cap is 70% CLTV, so a new line has up to 20% of value to work with, if the assessment stays and counts.
Now pay off the assessment before closing. The stack drops to 45%, and the line could reach up to 25% of value, subject to the $500,000 maximum and lender review.
Thin equity changes the story. Say the first mortgage is 62% of value and the assessment is 6%. That is 68% before a new line, which leaves almost no room under the 70% cap. If you pay off the PACE balance with cash, you free up space. Whether the rental has enough equity is a separate question from PACE. Lendmire’s piece Banks That Offer an Investment Property HELOC With Only 15 Percent Equity in the Rental walks through it.
The point: the assessment is not just paperwork. It is equity you cannot borrow against until it is cleared.
Where the Rule Bends
PACE is not the only claim that can sit ahead of a lender. These edge cases change the answer.
- Subordinate PACE. Some programs rank behind the first mortgage. A lender may treat these differently, but it can still object.
- Commercial PACE. C-PACE is a separate regime, mostly relevant to large multifamily or mixed-use buildings. Mixed-use and commercial properties are not eligible for an investment line anyway.
- Solar mortgages and UCC filings. A recorded solar mortgage or UCC filing is a real recorded instrument. It is cleared by payoff and release or a UCC-3, which is different from clearing a PACE assessment.
- HOA super-liens. In some jurisdictions, HOA dues liens can rank ahead of an existing mortgage. It is a separate priority problem with the same effect on a lender.
- LLC ownership. As covered above, an LLC-held rental fails the title rule before PACE even comes up.
Payoff First, Line Second, or a DSCR Cash-Out Instead?
When PACE is present, three paths exist. Which one fits depends on the property, the title, and your goal.
| Path | Handles PACE? | Main catch |
|---|---|---|
| Pay off, then apply for the line | Yes, via payoff and release | Needs cash up front |
| Line with PACE left in place | Rarely | Few lenders accept it |
| DSCR cash-out refinance | Payoff from proceeds | New first mortgage |
A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. The ratio compares rent to the full monthly obligation of principal, interest, taxes, insurance, and any HOA dues. In this context, that includes a higher tax line if the assessment stays. It is not a cash-flow guarantee. Repairs, vacancy, and management sit outside the calculation.
Typical ranges across the wholesale network:
- Cash-out refinance. Tops out around 75% LTV on a standard long-term rental, with about 6 months of seasoning as the common expectation.
- Coverage. A 1.00 ratio is where many select programs start. A separate select-lender path goes below 1.00, with leverage and terms adjusted.
- Credit. A 620 floor exists in parts of the network. Most programs want around 660, and 700 or better opens the strongest leverage tiers.
- Loan size. Standard programs go up to $3,000,000, with smaller balances available through select lenders.
- Reserves. Commonly around 6 months of PITIA, with variation by lender, leverage, and loan size.
- Title. A rental held in an LLC can generally be financed, subject to program terms.
The complete DSCR loans guide covers the full DSCR picture.
The trade-off is plain. A line is lighter on paperwork and leaves your first mortgage alone. A cash-out refinance replaces the first mortgage, yet it can clear the assessment in the same closing and works for LLC-held rentals.
Buying or Inheriting a Rental That Already Has PACE
Check the tax bill before you close on any rental. A seller may not mention the assessment, and it moves to you with the deed.
If you are buying, ask for the PACE payoff statement and the tax bill. Who pays it off at closing is something you and the seller can negotiate. If it stays, it becomes a recurring tax cost for you, which lowers what the rent actually earns.
If you inherit a rental, the same rule applies. The assessment stays, and so does its priority. Get the payoff statement before you apply for anything.
Tenants do not owe the assessment. It is the owner’s obligation, billed through the property tax bill. If your lease passes tax increases through to tenants, read that clause with a professional before assuming anything.
What the Assessment Does to Your Rental Numbers
PACE is expensive. HousingWire reports the CFPB found PACE added a substantial amount to borrowers’ annual property tax bills. The article also reports PACE loans cost more on average than first mortgages.
For a landlord, that is a higher tax line eating into net operating income. If the assessment is big relative to rent, it can drag a DSCR ratio down. Tax treatment varies; consult a qualified professional.
Payoff, when you can afford it, solves two problems at once: the lender’s priority issue and your cash flow.
Prepare Before You Call Anyone
Gather these before you start.
- Current tax bill showing the assessment line
- PACE payoff statement from the program administrator
- Title or lien search results
- Your first mortgage payoff or balance
- How the property is titled (individual, revocable trust, or LLC)
- Credit report and rental-income documents, depending on the program
Questions to ask any lender, or your broker:
1. Do you lend on rentals with a PACE assessment, or only after payoff and release?
2. Does the PACE balance count toward combined loan-to-value if it stays?
3. What exactly do you need to see to show the release?
4. Can the line’s own proceeds pay it off, or must it be cleared first?
5. What title types do you accept?
Key Terms Defined
PACE assessment: Financing for energy upgrades that is repaid as a charge on the property tax bill.
Lien priority: The order in which claims on a property get paid if it is sold or foreclosed.
CLTV (combined loan-to-value): Your first mortgage plus the new line, divided by the property’s value.
Payoff statement: A document from the program administrator showing what it takes to clear the assessment.
Release: The recorded proof that an assessment or lien no longer encumbers the property.
DSCR (debt service coverage ratio): Monthly rent divided by the full monthly obligation of principal, interest, taxes, insurance, and any HOA dues.
Vesting: How the property’s title is held, such as an individual, a trust, or an LLC.
Frequently Asked Questions
Can I get a HELOC on a rental property that has a PACE assessment?
Sometimes, but usually only after the assessment is paid off and released. Few lenders will open a line behind a claim that ranks ahead of it. Rare consent arrangements exist, and they are lender-specific.
Does a PACE balance count toward my combined loan-to-value?
If it stays on the property, plan on it counting against the cap. On Lendmire’s network, an investment line caps at 70% CLTV. If you pay it off and record the release before closing, it drops out of the stack.
Will filing a UCC-3 or releasing a mortgage clear a PACE assessment?
No. The assessment lives in the tax records. It is cleared by payoff and a release from the taxing authority. A UCC-3 clears a recorded UCC filing, which is a different instrument.
My rental is in an LLC. Can I still use an investment HELOC?
Not on this network. A DSCR cash-out refinance is the usual alternative for LLC-held rentals, subject to program terms.
Is a DSCR cash-out refinance a better fit than a line when PACE is present?
It depends on equity, title, and goals. A cash-out refinance can pay off the assessment from proceeds at closing, subject to lender guidelines and title review. A line leaves your first mortgage in place but usually needs the assessment cleared first.
Next Step
If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Equity-line placements are available in Lendmire’s 16 full-service states and are subject to lender guidelines.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its 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. NerdWallet – HELOC on investment property
2. CFPB – Residential PACE Financing final rule
3. FHFA – Statement on Certain Super-Priority Liens
4. Orrick
5. HousingWire
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Banks That Offer an Investment Property HELOC for a Mortgaged Rental With a Fixed First · Banks That Offer an Investment Property HELOC to Buy Another Home · Banks That Offer an Investment Property HELOC With the Longest Possible Draw Period
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.