How Much an FHA Cash-Out Lends on a Home With Leased Solar Panels

The Quick Read: The base loan is capped at 80% of the home’s adjusted value, and leased panels add nothing to that value. The panels do not block the loan by themselves, but they can shrink your cash in two ways. The lease payment may count against your debt ratios, and any buyout or lien cleanup comes out of your proceeds. Whether the lease can transfer to a new owner decides whether FHA works at all.

• The 80% cap applies to the loan amount, not to the cash you receive.
• A leased system is not your property, so the appraiser reports it but gives it no value.
• Your existing mortgage payoff and closing costs come out of the 80% before you see any cash.
• The lease agreement itself, especially its transfer terms, shapes the file as much as the numbers do.

What an FHA Cash-Out Actually Is

An FHA cash-out refinance replaces your current mortgage with a new, larger loan. You keep the difference in cash. It is for your primary residence only. Across the wholesale programs Lendmire places consumer loans with, the FHA cash-out reaches 80% loan-to-value on a home you have owned and lived in for 12 months before the case number is assigned. Lendmire is a mortgage broker licensed for consumer lending in 16 states, and it arranges these loans through wholesale lenders. It does not lend directly.

Two other pieces of the program matter for the math. FHA charges an upfront mortgage insurance premium of 1.75% of the base loan, and most borrowers finance it into the balance. An annual premium also applies, between 0.15% and 0.75% of the balance depending on term, loan amount and LTV. Neither is a price quote. They are program mechanics, and they shape how much cash is left.

How Do Leased Solar Panels Change the Appraisal?

They change it by adding nothing. FHA appraisal guidelines tell the appraiser to leave leased mechanical systems out of market value. That covers solar systems and power purchase agreements, where you buy the electricity but the provider owns the equipment. The appraiser still identifies the system in the report. The logic is simple: you cannot borrow against something you do not own.

The same approach shows up on the conventional side. Freddie Mac’s Seller/Servicer Guide says panels you do not own must not be included in the appraised value. So switching from FHA to conventional will not make leased panels count.

HUD’s drafting table for the FHA property standards update carries separate headings for leased equipment and solar energy systems, which shows how much attention this area gets.

Where the 80% Cap Comes From

The cap is a settled rule. HUD’s Mortgagee Letter 2019-11 set the maximum LTV and combined LTV on FHA cash-out refinances at 80% of adjusted value. HUD’s announcement of the change explains the history. The cap had been 95%, then dropped to 85%, then moved to 80%.

That history matters because older advice still circulates. The letter itself is now listed as superseded by the handbook, which absorbed its content. The 80% figure carried over.

Two details to keep straight:

• The 80% applies to adjusted value, not a raw sales figure. Panels you lease do not move that number.
• The 80% limit applies to the combined total of liens. Your new FHA loan plus any other lien on the home must fit under it. The upfront premium is financed on top of the base loan, as described above.

County loan limits are a second gate. For most homeowners the 80% test binds first, so the limit rarely decides the outcome. County limits change every year, so ask your loan officer how they apply in your county.

Step by Step: How the Loan Gets Underwritten

The sequence below shows where a lease touches the file.

1. Eligibility screen. The home must be your principal residence, owned and lived in for the required 12 months. Across the wholesale programs Lendmire places files with, a decision score of 580 or higher is the starting point. HUD sets lower credit tiers, but the network does not reach them.

2. Disclosure and documents. Expect to hand over the complete agreement, not just the monthly amount. Freddie Mac’s guide lists a copy of the agreement as part of the conventional file, and the FHA file generally calls for the same paperwork. The lease shows who owns the system, what happens on a sale, and what restrictions apply.

3. Appraisal. The appraiser identifies the system and gives it no value if you lease it.

4. Debt ratios. The lender decides how the lease payment counts. More on that below.

5. Title review. A solar provider may file a UCC-1 notice on the equipment. That filing is not a mortgage on your home. Still, the lender reviews it, and may ask for the provider’s consent or a subordination, depending on the lease terms.

6. Loan sizing. The lender takes 80% of adjusted value for the base loan, subtracts the payoff of your current mortgage, and subtracts costs and financed items. What remains is your cash.

Does the Lease Payment Count Against You?

Usually yes. The monthly lease or PPA payment is a recurring obligation, and lenders generally count it in your debt-to-income ratio unless the guidelines allow otherwise. Treat it as counted until your loan officer confirms otherwise in writing.

The contrast with conventional loans is useful, but do not carry it over to FHA. Freddie Mac allows a lease payment to be excluded when the lease provides a production guarantee. It allows PPA payments to be excluded when they are calculated only on the energy generated. Those are conventional conditions, not FHA conditions.

Why the ratios matter: the base FHA pair is 31/43, meaning housing cost over income and total debt over income. With documented compensating factors, the automated finding can reach 40/50 at the top tier. A lease payment sits in the total-debt side. If you are near the edge, one more monthly obligation can decide the file. Lease escalators make this worse, because the payment grows each year while the qualifying math is a snapshot.

Owned, Financed, Leased, PACE: What Each Looks Like to a Lender

Two cautions on this table. First, a financed system is yours and can be valued, but its loan payment is still debt. Second, PACE works differently from the others. The assessment rides on the property tax bill, and it is usually addressed in the transaction. Confirm the exact FHA treatment with your loan officer before you assume anything.

Worked Example: Where the Cash Goes

This example uses percentages of the home’s value, with no dollar amounts, so you can see the structure. The inputs are illustrative assumptions, not a quote.

• Adjusted value of the home: 100%. The leased panels add 0%.
• Maximum base loan under the cash-out: 80%.
• Assume your current mortgage payoff equals 60% of value.
• That leaves 20% of value before costs.
• The upfront premium is 1.75% of the base loan and is financed on top of it, so the final balance runs slightly above the base loan and the cash shrinks a little more.
• Closing costs come out of what is left.
• If you pay off the lease at closing, the buyout comes out too.

The takeaway: the 80% sounds like a lot, but the cash you hold is the cap minus your payoff, minus costs, minus anything tied to the panels. If the buyout or lien cleanup is large relative to your equity, the cash-out can end up too thin to be worth doing. Lease buyout amounts vary widely by provider and contract, so request a written payoff figure before you plan around any number.

Keep the Lease, Buy It Out, or Pick Another Path?

Buying out the lease helps in two ways. It removes the payment from your ratios and clears the provider’s filing. It costs cash, and that cash comes from your proceeds. Keeping the lease preserves cash but keeps the payment and the title issues in the file. Neither choice is right for everyone. Run both scenarios with your loan officer before you commit.

Where the General Rule Breaks

The rule that leased panels get no value and the loan stays at 80% holds in most files. A few edge cases change the picture.

• Transfer restrictions. Older FHA handbook language allowed leased energy systems only when the agreements did not stop you from freely transferring the property. Lease terms that block a sale or a new owner can make the property ineligible. Ask your loan officer to check the current handbook language against your contract.
• Provider consent. Some leases require the provider to approve the refinance or sign a subordination. A slow provider can hold up the file.
• Hawaiian Home Lands. The 80% change does not apply to Section 247 mortgages. This is a narrow exception.
• The FHA solar and wind program. That program is built for owned systems, not leased ones, so it does not help you here. It also would not change the 80% cap on a cash-out.

FHA Streamline vs. Cash-Out With Solar

The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. It does not give you cash. If your goal is a lower payment on a loan you already hold with FHA, the streamline avoids the appraisal, so the panel-valuation question never comes up. If your goal is cash, you need the cash-out, and the appraisal and the lease terms both apply.

Key Terms Defined

• Adjusted value: The value FHA uses to set the loan cap, built from the appraisal and not raised by leased equipment.
• Combined LTV: The total of all liens on the home compared with its value.
• Power purchase agreement (PPA): A contract where you pay a provider for the electricity its panels produce, and the provider owns the system.
• UCC-1 filing: A public notice that a provider has an interest in equipment, which is not the same as a mortgage on your home.
• PACE assessment: A financing charge for improvements that is repaid through your property tax bill.
• Debt-to-income ratio: Your monthly debts compared with your monthly income.

Common Misconceptions

• “Panels raise my appraisal, so I can borrow more.” Not when leased. The appraiser must exclude them.
• “A solar lease is a mortgage.” It is typically an equipment filing, not a lien in the mortgage sense, though the lender still reviews it.
• “80% means I get 80% in cash.” It is the cap on the base loan. Your payoff and costs come out first.
• “The lease payment does not count.” Treat it as counted for FHA until your loan officer confirms in writing.

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. Bring your lease or PPA agreement, since it shapes the file as much as your income does. Program figures are subject to lender guidelines and full file review, and nothing here is 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.

References

1. Freddie Mac Seller/Servicer Guide 5601.4

2. HUD drafting table, Modernization of FHA Minimum Property Requirements

3. HUD Mortgagee Letter 2019-11

4. HUD archived news release 19-114

5. HUD: Superseded Single Family Documents