The Quick Read: A solar filing on your home usually does not rule out an FHA cash-out refinance. The new lender must end up in first position, so the filing has to be paid off, terminated, or subordinated before closing. The right fix depends on what you actually have: a solar loan, a lease, a power purchase agreement, or a tax-style assessment. Each one is cleared differently.
Most homeowners who hit this problem find out late, when the title search comes back. This guide shows you how to find out early. It covers what to ask for, and in what order.
Key Takeaways
- “Solar lien” covers three different things. Mixing them up leads to the wrong fix.
- A UCC filing on panels is cleared by payoff and termination, or by subordination.
- A tax-style assessment (PACE) cannot stay in place on an FHA loan. HUD allows a cash-out to pay it off.
- Paying the debt does not clear the public record. Someone has to file the termination, and you should confirm it.
- Paying off solar from your proceeds shrinks the cash you walk away with.
Key Terms Defined
First position: The new mortgage is paid first if the home is ever sold to satisfy debts. An FHA lender requires it.
UCC-1 financing statement: A public notice that a solar lender or lessor claims an interest in the panels.
UCC-3 termination: The filing that ends a UCC-1. It is the document that actually clears the record.
Fixture filing: A UCC-1 recorded at the county, tied to the property. It shows up in a standard title search.
Subordination: The solar filer agrees to rank behind the new mortgage instead of being removed.
PACE assessment: A special assessment, collected like a property tax, that finances energy upgrades. It sits on the property itself.
Payoff letter: A written statement from the creditor of the exact amount needed to close out the debt on a given date.
Cash-out refinance: A new mortgage larger than your current balance. The difference, after costs and payoffs, comes to you as cash.
What Kind of Solar “Lien” Do You Have?
You may have any of several different things, and the contract tells you which.
The CFPB’s solar financing report explains that solar lenders commonly file UCC liens on the panels. Technically that is not a lien on the house. It can still cloud your title, because some jurisdictions treat it as reaching the whole property. When that happens, it has to be released or made subordinate to the new mortgage.
| Structure | What shows up | Usual fix |
|---|---|---|
| Solar loan, UCC-1 | State or county filing | Payoff, then UCC-3 |
| Fixture filing | County record, easy to see | Payoff and release, or subordination |
| Lease or PPA | Filing tied to the provider | Buyout or provider release |
| Recorded solar deed of trust | Real-property lien | Paid from proceeds like any lien |
| PACE assessment | Tax-style assessment | Must be paid off at or before closing |
Here is how to find out which one you have. Pull the original contract. Look for the words “loan,” “lease,” “power purchase,” or “assessment.” Then ask the title or escrow company for a preliminary title search. Don’t wait for the lender to order it.
Check for a battery too. It can carry its own lease or filing, separate from the panels.
A state-level UCC-1 covers panels as personal property and may not appear in a county search. A county fixture filing appears prominently. The Arizona-based ASCLP notes that title and escrow companies often require releases of both before a refinance.
Why It Matters for an FHA Cash-Out
Two things decide the outcome. The first is lien position. The second is how any remaining solar payment counts in your debt ratios.
On position, the new FHA mortgage has to sit first. An unresolved filing can keep that from happening. It is the same reason a second mortgage you plan to keep needs to be subordinated, or paid off.
On ratios, the lender reviews any solar loan or lease payment for your qualifying ratios. Across the wholesale programs Lendmire works with, FHA ratios start at a base of 31/43 (housing and total debt as a share of income). Documented compensating factors can reach 40/50 at the top tier. Whether a lease payment counts, and how, varies by lender. Treat that as a question for your loan officer rather than a settled rule.
Program leverage matters here too. The FHA cash-out reaches 80% LTV on a home you’ve owned and occupied for 12 months before the case number. That 80% covers your existing mortgage, the solar payoff, closing costs, and your cash, all together. The more solar debt you clear from proceeds, the less is left for you. Details of the FHA cash-out refinance program are subject to lender guidelines and full file review.
Three Ways to Clear It
Pay It Off, Then Terminate
This is the cleanest route. You pay the solar balance, and the creditor files a UCC-3 termination. In a cash-out, the payoff can come from loan proceeds at closing. The title company sends the creditor the money and requests the release.
The drawback is cash. Every dollar to the solar creditor is a dollar you don’t receive.
Subordinate
Some filers will agree to rank behind the new mortgage instead of leaving. The CFPB names release and subordination as the two resolutions. Subordination keeps the solar loan in place, which keeps its payment on your books.
It is not universal. Some solar companies decline, and some lenders won’t accept it. Ask early, because the answer shapes the whole file.
Buy Out a Lease or PPA
With a lease or power purchase agreement, you don’t own the panels. Your options are a buyout, which converts the system to owned and ends the filing, or a release from the provider. Ask for a written buyout quote. Ask whether it includes termination fees, because quotes vary and some arrive inflated.
The PACE Exception
PACE is the one solar-related obligation where HUD has spoken directly. HUD Mortgagee Letter 2016-11 briefly allowed FHA financing on some properties that stayed encumbered with PACE. HUD then reversed course in a 2017 HUD mortgagee letter. That letter says properties encumbered with PACE are no longer eligible for FHA-insured forward mortgages. It also says the existing policy allowing a cash-out refinance to pay off PACE is unchanged.
The working rule appears in the HUD Handbook glossary: a property that stays encumbered with PACE after closing is not eligible for FHA mortgage insurance. HUD’s reasons were priority lien status in default and the uncertain effect of the lien on value.
The practical takeaway is simple. A UCC filing can be released or subordinated. A PACE assessment has to be gone at closing.
Other programs differ. Some conventional guidelines handle PACE in cash-outs another way.
Step-by-Step Sequence
1. Identify the instrument. Loan, lease, PPA, deed of trust, or assessment. The contract answers it.
2. Order a title search early. You want to see the filings before the lender does.
3. Request a payoff letter or buyout quote. Ask for itemized figures with a good-through date.
4. Choose your path. Pay off, subordinate, or buy out.
5. Let the appraisal reflect ownership. Tell the appraiser whether the panels are owned or leased. Owned and leased systems are treated differently in value. Freddie Mac’s servicing guide, which is a conventional-loan source rather than an FHA one, shows the industry practice: the lender reviews panel ownership and any liens tied to the debt or lease. Your FHA underwriter confirms the FHA equivalent.
6. Close with the payoff in the settlement. The title company disburses from proceeds.
7. Verify the UCC-3 was filed. Paying the debt doesn’t clear the record. Someone has to file the termination, so request proof and search again.
Start before you apply. An unresolved filing can hold up funding, because the new mortgage has to be in first position. The creditor’s cooperation is the main variable, and you control it least.
A Worked Example
Say your home has an existing mortgage plus a solar loan with a UCC-1 filed on the panels. The FHA cash-out tops out at 80% LTV. Your existing mortgage uses some of that 80%. The solar payoff uses more. Closing costs use more still. Your cash is whatever remains. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Now imagine you also keep the solar loan in place through subordination. Your cash would be larger, but your monthly obligations would include the solar payment, which counts in your ratios.
Neither path is automatically better. If the solar balance is small, paying it off and removing the payment often simplifies the file. If it is large, subordination preserves cash, if the solar company agrees and the lender accepts it. Your loan officer can run both against your ratios.
When Things Go Wrong
The solar company doesn’t respond. Put your request in writing and send it to the address on the contract. Ask the title company to contact the filer directly, since they handle these releases routinely.
The payoff looks inflated. Ask for an itemized breakdown. Early-termination fees and prepaid interest can pad a quote. Compare it against your contract.
The filing remains after payoff. The termination was never recorded. Send proof of payment and demand the UCC-3.
The company has gone out of business. Releases get harder. The title company and a real estate attorney can advise, and a slow release should be started well before the closing date.
The filing is a mistake. Filings made in error, or after the obligation ended, can be challenged. That is attorney territory.
State law also matters. Whether a filing attaches to real property varies by state, and no national rule settles it.
Document Checklist
- The original solar contract, including any lease or PPA
- A payoff letter or buyout quote with a good-through date
- Your title search or preliminary title report
- A signed subordination agreement, if that is your route
- The recorded UCC-3 termination, after payoff
- Contracts for any separate battery system
Keep the termination. It is your proof the record is clean, and the next buyer or lender will ask for it.
Frequently Asked Questions
Can I roll the solar loan into the FHA cash-out?
Often, yes. The payoff can come from loan proceeds at closing, which reduces the cash you receive. It all has to fit within the program’s leverage limit, subject to lender guidelines and full file review.
Does paying off the loan remove the filing automatically?
No. The record clears only when a UCC-3 termination is filed. Ask for proof and have the title company search again.
Will solar payments hurt my qualifying?
They can count in your debt ratios.
What if I lease my panels?
You can buy out the lease or ask the provider for a release. A subordination may also be possible. Start with a written buyout quote and ask about fees.
Does it matter if my current mortgage isn’t FHA?
No. The cash-out refinance replaces your current loan whatever kind it is. The 12-month ownership and occupancy test and the 80% LTV limit apply to the new FHA loan. These specifics are subject to lender guidelines and a full review of property, leverage, and 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.
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.
For the program’s current guidelines, see FHA loan programs.
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References
1. CFPB Issue Spotlight: Solar Financing
3. HUD Mortgagee Letter 2016-11
4. HUD Handbook 4000.1 Glossary
5. Freddie Mac Guide Section 5601.4
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: Does a Quitclaim Delay Your First FHA Cash-Out Refinance? · Can a Texas Homestead Move From FHA to Conventional Cash-Out Refinance? · Does FHA Treat a Spouse Buyout as a Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.