The Quick Read: A PACE assessment makes a jumbo cash-out harder, and in most files it has to be paid off from the new loan’s proceeds. PACE is a tax-lien-backed home improvement financing that sits ahead of your mortgage. Jumbo lenders set their own PACE rules, so treatment varies by lender. Plan on the payoff shrinking the cash you walk away with. Everything here is subject to lender guidelines and full file review.
What Is a PACE Assessment, and Why Do Lenders Care?
A PACE assessment is financing for home improvements, often solar panels, windows, or HVAC, repaid through your property tax bill. The CFPB defines PACE financing as financing for home improvements that results in a tax assessment on your real property.
Here is the catch. Because it is collected like a tax, the lien usually takes priority over a mortgage, including mortgages made before and after it. A lender who wants first position finds the PACE lien standing in front of it.
That is why the same loan that looks easy on paper gets complicated. Your equity, credit, and income can all be strong. The lien-priority question still has to be answered before anyone funds the loan.
Does a Jumbo Loan Get Around the Fannie and Freddie Rules?
Yes. It escapes the rules, but not the problem.
A jumbo loan is one that starts one dollar above your county’s conforming limit. It isn’t sold to Fannie Mae or Freddie Mac, so their selling guides don’t bind it. Each jumbo investor writes its own PACE policy.
The agency rules still matter, because they show how the industry thinks. The FHFA’s statement on super-priority liens says a homeowner with a first-lien PACE loan can’t refinance into a Fannie or Freddie mortgage. Their reasoning is simple: the mortgages they back must stay in first position.
Across the wholesale programs I place files with, the pattern is consistent in spirit and different in detail. Some investors require payoff. Some decline the file. Some may accept it with adjusted terms. I can’t give you a single universal rule, and anyone who does is guessing.
How Is a Jumbo Cash-Out Underwritten, Step by Step?
The envelope matters first. Across the wholesale jumbo lanes, the headline lane starts at a 660 decision score. Leverage reaches up to 90% on some lanes, and several lanes reach 89.99% combined loan-to-value (CLTV, the total of all loans against the home’s value). The rest stop at 80%. Loans reach $5,000,000 on the largest lanes. Cash-out is allowed at lower leverage than purchase, and the largest lanes put a cap on how much cash you can take. All of this is subject to lender guidelines.
Here is how a file with PACE typically moves:
1. Disclosure. You report the PACE lien on the application. It also shows on the title report and your property tax bill. Fannie Mae’s guide requires the same disclosure on its own loans.
2. Documents. Expect to provide the PACE agreement, recent tax statements, and a current payoff statement from the PACE administrator.
3. Payoff structure. The usual benchmark is to pay the PACE lien from the new loan’s proceeds. Fannie Mae’s guide asks borrowers with enough equity to do exactly that.
4. Underwriting. The assessment is a household obligation, because it rides on the tax bill. Whether and how it counts in your debt-to-income ratio depends on the investor.
5. Decision. The lender weighs lien position, whether payoff is required, and whether your equity can absorb it.
Which Core Requirements Does PACE Touch?
| Requirement | What the lender tests | How PACE can affect it |
|---|---|---|
| Credit | Decision score; 660 on the headline lane | Rarely changes the score floor |
| Leverage | CLTV against appraised value | Payoff eats equity room |
| Debt ratio | 50% ceiling on fixed lanes | Assessment may add to obligations |
| Reserves | Months of full payment, rising with loan size | Payoff can drain cash planned for reserves |
| Appraisal | Value; two appraisals above a lane’s threshold | Improvements may or may not add value |
| Title | Clear lien position | PACE lien must be addressed |
The ratio ceiling is 50% on the fixed lanes, 45% on the adjustable lane, and 43% on the interest-only lanes. Reserves rise with the loan amount, so a larger cash-out asks for more cash on hand.
How Much Cash Do You Actually Receive?
Less than you might think. The math runs in this order:
1. Start with the new loan amount, which is the home’s value times the lane’s cash-out leverage.
2. Subtract your existing mortgage payoff.
3. Subtract the PACE payoff.
4. Subtract closing costs and any required escrow items.
5. What remains is your net cash.
Picture a home where the cash-out lane allows leverage well below the purchase maximum. Your existing mortgage uses up most of that room. The PACE payoff then comes out of what is left. On a file with a cash cap, the cap may bind before equity does.
I’m deliberately leaving out dollar figures here. Your PACE payoff amount changes with the date, so ask the administrator for a current statement early. A stale number can throw off the whole proceeds calculation.
Does Paying Off PACE Change How the Loan Is Classified?
Sometimes, and this is where lenders differ. Paying off PACE from proceeds may push a transaction that looked like a plain rate-and-term refinance toward cash-out treatment. Some lenders treat it as an allowed payoff. Others count it as cash-out.
Fannie Mae’s guide, for its own loans, carves out an exception so a PACE payoff doesn’t trigger the usual limit on limited cash-out proceeds. A jumbo lender isn’t bound by that. Ask early how your lender classifies it, because it changes the leverage that applies.
Where Does the General Rule Break?
Four edge cases come up.
Grandfathered liens. The FHFA’s 2010 statement on energy retrofit programs waived the Fannie and Freddie prohibition only for PACE liens obtained before July 6, 2010. Almost every residential PACE lien came after that.
Subordinate PACE. Some PACE structures don’t take first position. A lender may treat these more gently, but confirm that with the lender, not a guess.
Leaving PACE in place. The agency fallback of keeping an older PACE loan in place doesn’t translate to jumbo. Jumbo investors set their own terms.
Government-backed loans. FHA and VA have their own PACE limits.
What Should You Gather Before Applying?
- The PACE agreement and any project documents.
- A current payoff statement with a per-day figure if available.
- Your latest property tax bill showing the assessment.
- Proof of income and assets for reserves.
- A title report, which the lender will order anyway.
On the appraisal side, the lender reviews value as normal. Above a lane’s threshold amount, two appraisals are required. Whether your improvements add value depends on the appraiser.
What Are the Reserve Implications?
Reserves are measured in months of the full payment, and they rise with the loan amount. If your PACE payoff comes from proceeds, your cash-out is smaller. If you pay PACE from savings first, your reserves shrink instead. Either way, the money comes from somewhere. Ask the lender whether cash-out proceeds can count toward reserves on your lane.
What Are Your Options if Cash-Out Isn’t the Right Fit?
| Option | How it works | Tradeoff |
|---|---|---|
| Jumbo cash-out with PACE payoff | Proceeds retire the lien | Smaller net cash |
| Pay PACE off first | Use savings, then refinance | Drains reserves |
| Keep PACE, borrow differently | Second lien or other structure | Lender appetite varies |
| Wait | Let the assessment shrink | Delays your goal |
Why Do These Files Stall?
Three reasons show up repeatedly. First, the payoff statement is out of date and the numbers move. Second, the borrower assumed the PACE lien could simply stay in place. Third, the payoff leaves too little equity once leverage limits apply. All three are fixable if you catch them before the application, not after.
One more risk is worth knowing. PACE is collected through taxes, so missing the full tax bill can put the home at risk of foreclosure even when the mortgage is current, per Monroe County’s PACE FAQ.
Where Does Lendmire Fit?
Lendmire is a mortgage broker. It arranges loans through wholesale lenders and doesn’t lend itself. Its jumbo cash-out refinance program page lays out the lanes, and a broker can match a PACE file to the lenders whose policies fit. Nothing here is a commitment to lend, and every figure is subject to lender guidelines and full file review.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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.
Key Terms Defined
PACE assessment: Home improvement financing repaid through your property tax bill and secured by a tax lien.
Jumbo loan: A mortgage that starts one dollar above your county’s conforming limit.
Cash-out refinance: A new loan larger than your current mortgage, with the difference paid to you.
CLTV: Combined loan-to-value, the total of all loans on the home divided by its value.
Lien priority: The order in which claims on a property get paid if it is sold or foreclosed.
Reserves: Cash set aside, measured in months of the full housing payment.
Frequently Asked Questions
Can I do a jumbo cash-out if I have a PACE assessment?
Often yes, but usually only if the PACE balance is paid from the new loan’s proceeds. Some lenders decline PACE files outright. Policies vary by lender, so a broker shopping several wholesale lenders helps.
Will the PACE payoff reduce my cash-out?
Yes. The payoff comes out of proceeds before you receive anything, alongside your existing mortgage and closing costs. The remaining amount is your net cash.
Does the CFPB rule ban PACE?
No. The CFPB’s rule applies ability-to-repay and mortgage-style liability provisions to PACE financing. It adds protections rather than prohibiting the product.
Is every PACE lien grandfathered?
No. Only liens obtained before July 6, 2010 received the agency waiver, and almost all residential PACE liens came later.
Does a jumbo loan ignore PACE because it isn’t a Fannie or Freddie loan?
No. Jumbo investors set their own policies, and lien priority still matters to them. The treatment differs lender by lender.
For your own numbers, request a scenario review with Lendmire.
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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References
1. CFPB – Residential PACE Financing final rule
2. FHFA – Statement on Certain Super-Priority Liens
3. Fannie Mae Selling Guide B5-3.4-01
4. FHFA – Statement on Certain Energy Retrofit Loan Programs
5. Monroe County FL FAQ on PACE
This article is part of Lendmire’s Jumbo Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Does a Second Home Need Two Appraisals on a Jumbo Cash-Out? · Jumbo Cash-Out File Requirements for Owners With Record Equity · Jumbo Cash-Out Reserve Requirements on a Second Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.