The Quick Read: A solar lien payoff takes dollar for dollar from the cash you receive, and it does not change how large the new loan can be. The VA cash-out is a new first-lien loan. The solar balance, the old mortgage and the closing costs are all paid from the proceeds first, and what remains comes to you.
The Mechanism in Plain Terms
The new VA loan has to sit in first position. VA’s own guidance, Circular 26-16-18, cites the statute that requires a VA-guaranteed loan to be secured by a first lien. So anything that claims a place ahead of the new mortgage, or that the title company won’t let sit behind it, has to be cleared at closing.
VA cash-out estimate
Seeded with an example value, a typical balance, and a round cash request at the first-use fee; change any field.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the full-value VA cap with the first-use funding fee 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.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a VA cash-out refinance quote; a VA loan is priced by the lender at lock. The total loan, funding fee included, is capped at the program leverage on the reasonable value; the fee follows the tier chosen. The cash available is what the cap allows less the balances paid off and the fee, before closing costs, which are not included. The HELOC line is the line program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. The debt-to-income figure is a guideline; residual income decides a VA file. Licensed in sixteen states for consumer mortgages.
That’s why the solar payoff comes out of proceeds. The loan amount is set by the home’s appraised value and the program’s leverage limit. It is not set by what you owe. The payoff is a use of the money.
Across the wholesale programs we place VA files with, the VA cash-out reaches up to 100% of the appraised value, including the financed funding fee. It refinances any loan type into VA. The size of the cash you receive is the leftover after everything is paid.
The net-cash arithmetic runs in this order:
1. Start with the appraised value, then apply the 100% ceiling. 2. Subtract the payoff of your current first mortgage. 3. Subtract the itemized solar payoff. 4. Subtract the funding fee if it is financed, plus closing costs. 5. What remains is your cash out.
No dollar amounts belong in this example because payoff size depends on your contract. If the solar balance is a small slice of the loan, it trims the cash modestly. If the balance is large and your equity is thin, the payoff can consume most or all of the cash, and the refinance may not be worth doing at all.
Key Terms Defined
Payoff statement: A written, itemized figure from the solar creditor showing the balance, any per-day interest, any early-payoff fee and the date through which the figure is good.
UCC-1 filing: A public notice filed with a state office that a creditor has an interest in equipment, in this case the panels.
UCC-3 termination: The follow-up filing that ends a UCC-1 after the debt is paid.
Fixture filing or solar deed of trust: A recorded document tying the solar debt to the real estate itself, so it shows up in a county title search.
PACE assessment: A solar financing arrangement repaid through the property tax bill, which can take priority over a mortgage.
Funding fee: The VA charge on most loans, which can be financed into the balance and is waived for exempt veterans.
Why the Type of Solar Arrangement Decides Everything
“Solar lien” is an umbrella phrase. Four different financed or contractual arrangements sit under it, plus the case where the system is owned outright and nothing shows on title. Each clears differently. The first step in any file is classifying which one you have.
| Solar structure | What shows on title | How it clears | Effect on proceeds |
|---|---|---|---|
| Owned outright | Nothing | No action | None |
| Lease or PPA | Often a UCC-1 | Transfer, buyout or release | No loan balance; may need a buyout |
| Financed, equipment filing | State UCC-1 | Payoff, then UCC-3 | Payoff reduces cash |
| Financed, recorded deed of trust | County record | Payoff, then recorded release | Payoff reduces cash |
| PACE assessment | Tax-bill lien | Payoff from proceeds | Payoff reduces cash |
Treat the table as the general pattern. Your title company has the final say on what your file needs.
Financed systems with a UCC-1
Some practitioners treat a plain equipment filing as a claim on the panels, not a dollar lien that has to be paid from proceeds. Others say title companies often still want a release or subordination. The sources conflict on this one. The honest answer is that title decides, and you shouldn’t assume the filing can stay.
Leases and PPAs
With a lease or power purchase agreement there is no loan balance to pay off. That changes the math in two ways. First, VA’s energy efficiency guidance puts leased systems and systems with UCC filings on its “not valued” list, so those panels add nothing to the appraisal. Second, a lease payment may count as debt in underwriting, while a PPA is generally treated more like a utility bill. Lenders handle these differently, so ask early.
PACE is the hard case
PACE is repaid through the tax bill and can outrank the mortgage. VA’s 2016 circular once allowed PACE obligations to stay on VA-guaranteed loans under conditions. Whether that still holds is a question for a loan officer, so confirm the current VA position before relying on either view.
For context, the conventional side is stricter in writing. The Fannie Mae Selling Guide says PACE loans typically have automatic first lien priority and requires payoff where there is enough equity. That’s a conventional rule, not VA policy, but it shows how the industry views the lien.
The consumer-protection side has also moved. The CFPB’s PACE rule summary says the rule treats PACE financing as credit under Regulation Z, applies ability-to-repay requirements and excludes it from qualified-mortgage status. The Federal Register version has the full text.
How the File Is Underwritten, Step by Step
1. Classify the arrangement. Pull your solar contract and figure out which row of the table you are in.
2. Run title and lien searches. The lender, not the appraiser, is responsible for finding ownership structure and flagging financing, per an appraisal education FAQ. A state-level filing may not appear in a county search, so a thorough lender checks both.
3. Request the itemized payoff. Ask for the balance, per-day interest, any early-payoff fee, UCC-3 instructions and a good-through date. A figure that expires before closing gets refreshed.
4. Appraisal. VA sets the reasonable value that caps the loan. Leased and UCC-filed systems carry no value. A system with a personal loan may carry some, and the appraisal should describe its size, type and cost.
5. Underwriting. Residual income is the controlling test on a VA loan. The 41% debt-to-income figure is a guideline, not a cap, and a ratio above it needs residual income well above the table. A financed system’s payment is debt that gets counted, so paying it off removes it from your ratios. The VA Lenders Handbook, Pamphlet 26-7, is the reference document.
6. Closing. The payoff goes out through the settlement statement. After closing, a UCC-3 or recorded release should be filed, depending on the instrument.
Remember that a credit decision score of 580 is where the wholesale programs we place VA loans with begin, and that is subject to lender guidelines and a full file review. Nothing here is a commitment to lend.
What Our Desk Sees in These Files
A lien that surfaces late, at the title stage, forces a fresh payoff request and a rerun of the net-cash numbers. Borrowers who pull their solar paperwork before applying avoid most of that. A stale filing left over after a paid-off system is the other repeat offender: the debt is gone, but the record stays until a UCC-3 is filed.
Where the Rule Breaks
- Thin equity. If the payoff plus the existing mortgage uses up the 100% ceiling, there’s no cash left. The refinance can still make sense only if the net tangible benefit is real.
- Stale filings. A paid-off system can still have a filing on title. Get the termination recorded.
- Inflated payoff quote. Compare the quote against your contract. Early-payoff fees and per-day interest are the usual causes of a surprise.
- VA-to-VA versus other loans. VA’s refinancing slides tie seasoning and recoupment certifications to VA-to-VA Type I loans. A non-VA payoff still needs a net tangible benefit. For the VA cash-out, that means one of VA’s eight listed benefits, and the half-percent rate-reduction test belongs to the IRRRL, not to this loan.
- The IRRRL. It isn’t a cash-out. It doesn’t hand you cash and it isn’t a way to roll a solar loan into your mortgage. VA’s energy-efficiency guidance has its own tiers, and that guidance is not a rule that solar debt can be folded into an IRRRL.
- Occupancy. VA loans require that you live in the home.
The Funding Fee and Entitlement
The VA cash-out funding fee is 2.15% on first use and 3.3% on subsequent use, unless you’re exempt, such as a veteran receiving compensation for a service-connected disability. It can be financed, and a financed fee counts inside the 100% ceiling. So a larger fee means less room for cash. If your funding fee tier changes between first and later use, run both versions of the net-cash steps.
Your certificate of eligibility from VA decides your entitlement. With full entitlement there is no VA loan limit and no mortgage insurance, and the wholesale programs we place files with serve amounts to $4,000,000. With remaining entitlement a down payment may be required, so speak with a loan officer.
Cash-Out, Pay Down First, or Leave It Alone
This is a real decision, and the right answer shifts with the borrower.
- A cash-out can make sense if the net tangible benefit is clear, you also need cash for something else, and the solar balance is a small slice of the loan. You trade a standalone solar payment for a larger mortgage balance, and your monthly budget should be compared both ways.
- Paying the solar loan down yourself can win if you have savings and your existing VA loan is working. You avoid the funding fee and the closing costs, and you keep your current first mortgage in place.
- Leaving it alone is fine if the solar balance is modest and the plain equipment filing isn’t blocking anything. Not every refinance needs to happen.
- Military families who move often should weigh how long they’ll stay. A cash-out has costs, and a short stay gives them less time to pay off.
Timeline Checklist
- Pull your solar contract and identify the structure.
- Ask for title and lien searches early.
- Request the itemized payoff with a good-through date.
- Set payoff instructions at closing.
- Confirm that the UCC-3 or release is recorded afterward.
Common Mistakes
- Assuming paying off the loan removes the lien. The termination filing still has to be recorded.
- Treating every solar lien alike. Lease, equipment filing, deed of trust and PACE clear differently.
- Assuming solar always adds appraised value. VA’s guidance excludes leased and UCC-filed systems.
- Calling PACE “just another solar loan.” It’s a tax-collected assessment that can outrank the mortgage.
- Waiting for the title company to find the filing. A late discovery can delay closing, so bring your solar contract to the lender at the start.
Lendmire’s VA cash-out refinance program page covers how the program itself works.
Frequently Asked Questions
Can a VA cash-out pay off a solar loan?
Yes, in the typical case. The payoff is made from loan proceeds at closing through the settlement statement. It reduces the cash you receive, and it’s subject to lender guidelines and full file review.
Does the solar payoff count against the 100% ceiling?
It doesn’t raise or lower the ceiling. The loan can reach up to 100% of the appraised value, including the financed funding fee, and the payoff is a use of that amount. So the payoff reduces your cash, not the loan’s maximum.
What if my equity is too thin to cover the payoff?
Then there may be little or no cash out, and the refinance may not be worth doing. A simpler path is paying the solar balance down yourself, or leaving the system in place if title allows it.
Is a leased system different from a financed one?
Yes. A lease or PPA has no loan balance to pay off, and VA’s guidance excludes those panels from appraised value. A lease payment may count as debt, while a PPA is usually treated like a utility bill, though lenders differ.
What if the filing stays on title after I pay?
Ask the solar company for the UCC-3 or recorded release and have title confirm it’s filed. A lingering record can hold up a file, so check before applying rather than at the closing table.
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. 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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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
2. VA Loan Guaranty Conference: Energy Efficiency and VA Home Loans
4. CFPB Residential PACE Rule Executive Summary
5. Federal Register: Residential PACE Financing
6. McKissock Appraisal FAQ: Solar
8. VA Loan Guaranty Conference: Refinancing Loans
This article is part of Lendmire’s VA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a VA Appraisal Value Caps a Cash-Out Loan · VA Cash-Out vs Jumbo Cash-Out to Buy Out an Ex Who Is on Title · How to Use a VA Cash-Out to Fund a Condo Renovation
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.