The Quick Read: It depends on what kind of solar lien you have. A PACE assessment is a hard stop unless it is paid off in the transaction. An ordinary solar loan, with a filing on the panels, is usually handled through payoff or subordination at closing. Either way, whatever gets paid off comes out of the cash you receive, and FHA cash-out tops out at 80% loan-to-value, subject to lender guidelines and full file review.
What Does “Solar Lien” Actually Mean?
“Solar lien” is a loose phrase. It covers several different arrangements, and FHA treats them differently. Start by finding out which one you have. The answer is in your installation contract, loan agreement, lease, or tax bill.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.24% as of October 29, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium 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.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
Here are the common structures:
| Solar structure | What shows up | Typical FHA cash-out path |
|---|---|---|
| Owned outright | Nothing | No obstacle |
| Solar loan, UCC-1 on equipment | State or county filing | Payoff or subordination |
| Recorded deed of trust or fixture filing | County land records | Payoff, usually |
| PACE assessment | Property tax bill | Paid off in the transaction |
| Lease or PPA | Provider’s UCC filing | Provider consent, or buyout |
A UCC-1 is a notice that a creditor has a claim on specific equipment, here the panels. It is not a mortgage. A fixture filing or a recorded deed of trust is more serious, because it ties the claim to the property records.
The CFPB’s Issue Spotlight on solar financing notes that lenders commonly file UCC liens on the panels themselves. It says the lien is technically not on the property, but it can muddy the title because some jurisdictions treat it as reaching the whole property. If that happens, the lien must be released or made subordinate to the new mortgage.
So don’t assume a plain UCC-1 is harmless. Don’t assume it kills the deal, either. Nobody has published a rule either way, which is why your title company and lender make the call.
Why PACE Is the Hard Stop
PACE is the one solar-related structure HUD has addressed directly. PACE stands for Property Assessed Clean Energy. The repayment is added to your property tax bill, and that assessment can rank ahead of your mortgage.
HUD’s Mortgagee Letter 2017-18 says properties encumbered with PACE obligations are no longer eligible for FHA-insured forward mortgages. That letter reversed an earlier, looser policy. HUD’s own news release says FHA will no longer insure new mortgages on properties that include PACE assessments.
In practice, a PACE balance generally has to be paid off at or before closing. On a cash-out, that payoff comes from the loan proceeds. You can’t leave it on the tax bill and expect the loan to move forward. Ask your loan officer how the current handbook handles the details on your file.
Also be careful if you already have an FHA loan. HUD warned that adding PACE to an already-insured FHA mortgage is risky and may violate your mortgage terms.
How the 80% Cap Shrinks Your Cash
Every dollar you pay off at closing comes out of your cash-out. The FHA cash-out refinance reaches 80% loan-to-value on a home you have owned and occupied for the 12 months before the case number. HUD cut the cap from 85% to 80% for case numbers assigned on or after September 1, 2019, per its news release. County loan limits apply on top of that.
Think of the new loan as a bucket with a fixed size. Three things fill it before any cash reaches you:
1. Your existing mortgage balance.
2. The solar payoff, if it has to be cleared.
3. Financed costs, including the upfront mortgage insurance premium of 1.75% of the base loan.
Whatever room is left is your cash. Picture a home where the existing mortgage already uses up most of the 80%. Add a solar payoff, and the cash-out can shrink to very little. That is the honest answer for many solar owners: the loan is possible, but the check is smaller than expected.
The cap also keeps at least 20% of the home’s value as your equity. If your equity is thin, this is the first place the plan breaks.
Lendmire’s FHA cash-out refinance program page lays out the program basics. Across the wholesale programs Lendmire places FHA files with, the cap and the 12-month ownership requirement are the two limits that matter most on solar files.
Does the Appraisal Treat Solar Panels as Value?
Sometimes, and not as much as owners hope. Appraisers are expected to identify solar systems, and the lender tells the appraiser who owns them and how they are financed.
Owned panels may add to appraised value. Leased and PPA panels generally do not, because you don’t own them. Conventional guidance, such as Fannie Mae’s appraiser guidance on solar panels, takes the same approach. It says separately financed panels shouldn’t add value unless the documents show they can’t be repossessed on default.
This matters because appraised value sets your 80% ceiling. A system you financed at a high price does not automatically raise the value. If the appraisal gives the panels little credit, the solar payoff eats cash with no matching boost to the cap.
What Happens to Your Monthly Budget?
Payment history on a solar loan matters twice. Before closing, the payment counts in your debt-to-income ratio, which is your monthly debts compared with your monthly income. After closing, it depends on the choice you make.
- Pay it off with proceeds: the solar payment goes away, but your new FHA payment is larger.
- Leave it in place (if the lender allows it): the solar payment stays in your ratios.
Across the wholesale programs Lendmire places files with, the base ratio pair is 31/43 (housing to total debt), and documented compensating factors can reach 40/50 at the top tier. The automated underwriting finding governs most files. Lease and PPA payments are treated according to the lender’s reading of the agreement, and the rules differ by agency.
Paying off a solar loan can actually help your ratios. It can also hurt, if the larger new payment outweighs the debt you removed. A lender can run both versions before you commit.
Mechanics: From Contract to Clear Title
Here is the order of operations on a typical solar-lien file.
1. Identify the instrument. Gather your solar contract, loan agreement, lease, or PPA.
2. Order a title search. The title company, not you, confirms what is recorded. A county-recorded fixture filing will appear on the title commitment. A plain UCC-1 may show up only in a state-level search.
3. Pick a clearance path. Payoff means the solar creditor sends a payoff statement, the balance is paid from closing proceeds, and a termination filing (a UCC-3) follows. Subordination means the solar creditor agrees to rank behind the new FHA mortgage. With a lease or PPA, the provider consents or temporarily lifts its filing.
4. Disclose it at application. Surprises at the title stage cause the most trouble.
5. Confirm the release. After closing, make sure the termination is filed so the old claim doesn’t resurface.
Third parties handle most of these steps, and they move on their own schedules. Start the payoff or subordination request early.
Documents You Will Likely Need
Expect the lender to ask for:
- The solar contract or loan agreement.
- A payoff or subordination letter from the solar company.
- Copies of any UCC filings.
- The title commitment.
- An appraisal with the solar section completed.
Having these ready keeps the file from stalling at the title step.
When Cash-Out Is the Wrong Move
An FHA cash-out is not always the best way to deal with a solar balance. Consider alternatives when:
- Your equity is thin. The 80% cap leaves little room once the existing mortgage and the payoff are counted.
- You already have an FHA loan. An FHA Streamline refinances an existing FHA loan with no appraisal, limited credit review, and a net tangible benefit. It isn’t a cash-out, so it works differently. Confirm any PACE treatment with your lender first.
- You only need to remove the solar payment. A rate-and-term refinance with an appraisal reaches 97.75% on a principal residence occupied for the previous twelve months.
- Your current mortgage is worth keeping. Replacing a loan you like to fix a small solar balance can cost more than it saves.
- You have lots of equity but want to keep your first loan. A second lien may fit better.
One more distinction: FHA has a separate policy that lets lenders finance new solar or wind improvements into a loan. That is not a cash-out, and it does not let you take cash back.
Key Terms Defined
UCC-1 filing: A notice that a creditor has a claim on specific equipment, such as solar panels.
Fixture filing: A UCC filing recorded in county land records, tying the claim to the property.
PACE: A financing program that repays energy upgrades through your property tax bill.
Subordination: An agreement by one creditor to rank behind another, here behind the new FHA mortgage.
Cash-out refinance: A new, larger mortgage that pays off the old one and gives you the difference in cash.
Loan-to-value (LTV): The loan balance divided by the home’s appraised value.
Common Mistakes to Avoid
- Assuming any solar lien blocks FHA. HUD’s bar is for PACE.
- Treating a UCC-1 as a mortgage, or as nothing at all.
- Counting on panels to raise your appraised value.
- Planning for the old 85% cap.
- Finding the solar filing at the title stage instead of at application.
- Forgetting that a payoff is paid from your proceeds.
Frequently Asked Questions
Can I do an FHA cash-out if I have a PACE loan?
Only if the PACE obligation is paid off in the transaction. HUD’s policy bars FHA insurance on properties still carrying PACE. The payoff generally comes from your loan proceeds, which lowers your cash. Ask your lender how the current handbook treats your file.
Does a UCC-1 on my solar panels stop an FHA cash-out?
Not automatically. HUD has not published a rule on plain UCC-1 filings. Lenders and title companies usually ask for a payoff or a subordination so the new mortgage holds first position. The CFPB notes some jurisdictions view the filing as reaching the whole property, which is why it gets cleared.
Can I roll the solar loan payoff into the new FHA loan?
Generally yes, as long as the new loan fits under the 80% cap and county loan limits. The payoff reduces the cash you receive. It does not add extra room.
Do leased solar panels affect an FHA cash-out?
Yes, they can. The lender decides how to treat the lease payment in your ratios, and the provider may need to consent to the new mortgage. Leased panels generally do not add appraised value.
Does FHA cash-out work on a second home or rental?
No. FHA cash-out is for your owner-occupied principal residence.
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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.
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References
1. CFPB Issue Spotlight: Solar Financing
2. HUD Mortgagee Letter 2017-18 (PACE)
4. HUD News Release 19-114 (cash-out LTV)
5. Fannie Mae appraiser guidance on solar panels
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can an FHA Cash-Out Refinance Pay Off a Spouse in a Divorce? · Best FHA Cash-Out Refinance Program After Twelve Months of Occupancy · Can a Retiree Get an FHA Cash-Out on Social Security Income?
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.