The Quick Read: A solar filing on your home rarely ends an FHA cash-out by itself. The type of filing decides the path: it gets paid off, released, or it blocks the loan. Cash-out reaches 80% loan-to-value on a home you have owned and lived in for 12 months, and any solar payoff comes out of that same room. Solar debt collected through your property tax bill is the hardest case.
Key Takeaways
- “Solar lien” is a loose term. Owned panels, a solar loan, a lease, a power purchase agreement, and a tax-collected assessment each show up differently on title.
- Paying off solar debt uses up equity. The new loan, including the payoff, has to fit under the 80% cap.
- Across the wholesale programs we place FHA files with, a clean payoff or release at closing is the usual way to remove a solar filing.
- Cash-out is for the home you live in. It is not for second homes or rentals.
- Old online advice about FHA and solar conflicts with itself. Check the current rule before you rely on any article, this one included.
Key Terms Defined
UCC-1 filing: a public notice that a solar company has a claim on the equipment. It is not a mortgage on your house, but it can still show up in a title search.
Subordination: an agreement where an existing lienholder agrees to sit behind your new first mortgage.
PACE: a financing program where solar is repaid through your property tax bill and stays attached to the property.
Adjusted value: the appraised value after FHA’s adjustments. The 80% cap is measured against it.
CLTV: combined loan-to-value, meaning all loans secured by the home added together and divided by value.
Payoff letter: a statement from a lender of the exact amount needed to clear a debt on a given date.
Seasoning: the waiting period before a loan or ownership counts. For FHA cash-out, you must own and occupy the home for 12 months before the case number is assigned.
Which Solar Arrangement Do You Have?
Everything turns on this answer, and many homeowners do not know it. Pull your solar contract first. Then check your title and your property tax bill.
| Arrangement | What is usually recorded | Typical path in a cash-out |
|---|---|---|
| Owned, paid in cash | Nothing | No action |
| Solar loan, equipment only | UCC-1 filing | Payoff or release |
| Solar loan, home as collateral | Recorded lien on the house | Payoff from proceeds |
| Lease or power purchase agreement | UCC-1 filing | Lender review; transfer or buyout |
| PACE | Assessment on tax record | Payoff at closing |
Treat that last column as practitioner experience, not a promise. Lenders differ on how they handle leases and power purchase agreements, and the current FHA Handbook is the place to confirm the rule. Ask your loan officer early, before the appraisal is ordered.
The UCC-1 deserves a note. Many borrowers hear “lien” and assume the solar company can foreclose on the house. A UCC-1 secures the panels, not the home. Title companies still flag it, and it can add a step.
How Does Solar Debt Fit Under the 80% Cap?
Solar debt competes for the same equity as everything else. Across the wholesale programs behind Lendmire’s FHA cash-out refinance program, the cash-out loan reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
That cap covers the whole new loan. Your existing mortgage gets paid off from it. So does any solar loan or tax-collected solar balance you choose, or are required, to clear.
Think of it as a bucket. The bucket holds 80% of adjusted value. Your old mortgage goes in first. The solar payoff goes in next. Closing costs and the financed upfront mortgage insurance premium of 1.75% of the base loan also draw from the new loan. Whatever is left is your cash.
If you keep a solar debt in place instead, it still counts toward combined leverage. Whether a lender allows a retained solar lien, or insists on subordination, varies by lender.
A Worked Example
These numbers are hypothetical, in percentages of value, to show the mechanics.
- Appraised value: 100%.
- Existing first mortgage: 55% of value.
- Solar loan with a recorded lien: 6% of value.
- Combined debt to clear: 61% of value.
- Maximum new loan at the cash-out cap: 80% of value.
- Room before costs: 19% of value.
That 19% is not your cash. The financed premium and closing costs come out of it first. Without the solar payoff, the room would be 25% of value. The solar debt took about a quarter of your potential cash.
Now flip it. Say the existing mortgage is 72% of value and the solar payoff is 6%. That totals 78%, which leaves almost nothing after costs. A first-time equity borrower in that spot may find the cash-out does not pencil. That is a real answer, and it is better to learn it before paying for an appraisal.
The Cleanup Sequence, Step by Step
Do these in order. Skipping ahead is how files stall.
1. Identify the structure. Read the contract. Find out whether you own, finance, lease, or have a tax-collected assessment.
2. Gather the documents. Collect the solar agreement, your latest statement, and any transfer or buyout terms. Check your property tax bill for a line you do not recognize.
3. Ask for a payoff letter or release terms. Check for early-payoff fees. Some solar contracts charge them, and those fees reduce your net cash.
4. Get title looked at early. Your title company can tell you what is recorded, so you see it before it becomes a surprise.
5. Tell the lender what will be paid off. The loan officer needs this before the appraisal, so the appraiser has accurate facts.
6. Confirm the release is recorded. After closing, a filing that was paid should be cleared from the public record. Do not assume it happened on its own.
Why PACE Is the Hard Case
PACE is different because it behaves like a property tax. HUD’s mortgagee letter on PACE says homes still carrying a PACE obligation are not eligible for new FHA-insured forward mortgages. The same letter says an FHA cash-out refinance may pay off a PACE obligation. So a cash-out is one way to clear it.
That makes the equity math the whole question. If your equity cannot absorb the PACE payoff under the 80% cap, there is no path to keep it and refinance with FHA. The assessment must be satisfied at or before closing and removed from the tax record and title. The Handbook also tells the lender to let the appraiser know the PACE debt will be paid off as a condition of approval.
There is a consumer-protection side too. The CFPB’s PACE rule summary says PACE is treated as credit, with an ability-to-repay review. The CFPB page lists the rule’s effective date.
How Solar Shows Up in the Appraisal
How your panels count depends on who owns them. Owned panels may add value, and the appraiser needs to know how they are owned. A leased system generally adds little or nothing to value. Your lender is responsible for giving the appraiser accurate facts about the structure.
The risk is a shortfall. If you paid a lot for a system, the appraisal may credit far less than the cost. Lower value means a lower 80% cap, so your cash shrinks twice: once from the payoff and once from the cap.
Where the General Rule Breaks
- Occupancy. FHA cash-out is for your principal residence. Occupancy decides the leverage, so a second home or rental does not qualify for this program.
- Recent install. A system added during the past year does not reset the 12-month ownership clock. But a solar payoff on fresh debt eats equity fast.
- Thin equity with PACE. As covered above, you may not be able to clear it.
- Leases with transfer terms. Some lenders ask to review the lease and its transfer clause. Others set their own limits.
- The FHA solar add-on. Older HUD material described adding a new solar system’s cost to an FHA-insured loan. That is a different product from a plain cash-out, and its availability should not be assumed. Ask the loan officer.
- Late payments. A recent late payment on your current mortgage can block cash-out, even if the solar side is clean.
Mistakes First-Timers Make
Believing “FHA lets me cash out 85%.” That is old. HUD lowered the cap from 85% to 80%. Some older articles still show the higher number. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Assuming a UCC-1 is harmless. It does not take your house, but it can hold up title until it is cleared.
Counting on solar to pay for itself. The CFPB’s solar financing spotlight warns about overstated savings claims and fees that can run 30% or more above the cash price.
Trusting stale rules. Online advice about FHA and leased solar or PACE conflicts because the rules changed. The current wording lives in HUD’s Handbook 4000.1. Confirm it there, or have your loan officer confirm it in writing.
Ordering the appraisal before knowing the payoff. Learn the solar structure first.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What Your Decision Looks Like
Your choice is usually between three paths. Pay off the solar from proceeds. Keep the existing solar debt and skip cash-out. Or leave the home’s financing alone and pursue a different product.
Before deciding, ask your loan officer:
- Does my solar structure need a payoff, a release, or a lender review?
- How much of my 80% room does the payoff use?
- Are there early-payoff fees in my solar contract?
- If the appraisal comes in low, what happens to my cash?
- Am I past the 12-month ownership and occupancy test?
Equity is the deciding factor. If the payoff leaves meaningful cash after costs, cash-out can make sense. If it leaves almost none, you may be paying to swap one debt for another. Qualification stays subject to lender guidelines and a full file review.
If you are weighing a cash-out refinance on the home you live in against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. To see your own numbers, request a scenario review.
Frequently Asked Questions
Will a UCC-1 filing stop my FHA cash-out?
Usually not by itself. A UCC-1 secures the equipment, not the house. Title will flag it, and it generally needs a payoff, release, or lender review before closing.
Can I keep my solar loan and still do a cash-out?
Sometimes, but it depends on the lender and on how the loan is secured. A solar debt recorded against the house counts toward combined leverage and may need to be placed behind the new first mortgage. Paying it off from proceeds is the more common route.
Does a solar lease count as debt?
Lenders treat leases and power purchase agreements differently, and some count the payment in the ratios. The base ratios are 31/43, and documented compensating factors can reach 40/50 at the top tier. Ask how your lender handles it.
Can PACE stay on my home after an FHA cash-out?
No. A home still carrying a PACE obligation after closing is not eligible for FHA mortgage insurance. The cash-out may pay it off, as long as your equity fits under the 80% cap.
Does paying off solar reduce my cash?
Yes, dollar for dollar. The payoff comes out of the new loan, which is capped at 80% of adjusted value. Any early-payoff fee in your solar contract reduces it further.
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.
For the program’s current guidelines, see FHA loan programs.
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References
1. HUD mortgagee letter on PACE obligations
2. CFPB residential PACE rule executive summary
3. HUD press release on the FHA cash-out LTV change
4. CFPB Issue Spotlight: Solar Financing
5. HUD Housing Handbooks (Handbook 4000.1)
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: FHA Cash-Out Condo Questionnaire Rules for a First-Time Equity Borrower · FHA Cash-Out Refinance File Expectations for a First-Time Equity Borrower · FHA Cash-Out Second Lien Rules for a Texas Homestead
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.