Top Investment Property HELOC Providers When the Home Has a PACE Assessment

The Quick Read: A rental with an unpaid PACE assessment is hard to place on an investment HELOC. The assessment is repaid through the property tax bill and ranks ahead of the mortgage and any new line, so the investment lines in Lendmire’s wholesale network treat it as ineligible until it is paid off and released.

• The investment line in the network tops out at 70% CLTV, with a $500,000 maximum line and a 700 minimum credit score.
• A PACE assessment is a tax-bill item, not a mortgage, so a mortgage-only title search can miss it.
• The usual fix is a payoff statement, payment in full, and a recorded release before the file is re-run.
• A DSCR cash-out refinance is the common alternative when the PACE balance is large relative to the equity.
• No single provider is “top” for every file. The right program depends on the property, the equity, the vesting, and the credit profile, and a broker shops several wholesale lenders against that scenario.

What Is a PACE Assessment, and Why Does It Matter on a Rental?

PACE stands for Property Assessed Clean Energy. It pays for improvements, often solar panels, and the owner repays it as a special assessment on the property tax bill. Mayer Brown’s analysis of the final PACE rule describes it as a tax assessment secured by a lien that takes priority over existing and future mortgages.

That priority is the whole problem. A HELOC lender on a rental is lending in second position at best, behind the first mortgage. If a PACE balance sits ahead of both, the new line is third in a foreclosure waterfall. That position is a weak one for any lender to accept.

The assessment also stays with the property, not the owner. Selling does not make it disappear. A buyer or a new lender inherits it unless it is paid off at closing. The federal proposed rule on PACE describes both points: the assessment is tied to the property, and in a foreclosure sale it is paid from the proceeds ahead of the earlier mortgage.

Priority depends on state and local law, so not every assessment carries it in every jurisdiction. A lender will not assume the favorable reading. It will treat the assessment as senior until title work says otherwise.

How Does Underwriting Treat a PACE Assessment on an Investment HELOC?

Underwriting treats the PACE balance as a senior claim on the property that consumes equity before the new line gets any. The network’s investment line generally does not allow the assessment to stay in place at all. The file becomes a payoff-and-release exercise.

Here is how the file runs, step by step.

1. Identify the instrument. A PACE assessment is not a mortgage, so a title search for mortgages can miss it. Look for it as its own line on the property tax bill, then check county tax records and the PACE administrator’s records.

2. Rank the liens. The usual order is property taxes, then PACE where it has priority, then the first mortgage, then the new line. The network’s investment line is a standalone line that can sit in first or second position. Whichever position it takes, the PACE claim ranks ahead.

3. Measure the equity. Lenders test combined loan-to-value (CLTV): every lien on the property, divided by its value. Because the line cannot close with PACE in place, the balance matters mainly as a measure of the equity the payoff would use up, which is equity no longer available under the 70% CLTV ceiling on an investment line.

4. Run the valuation. An investment line tops out at $500,000, so it ordinarily runs on automated valuation, with no traditional appraisal. Consumer Finance Monitor’s summary of the final rule notes that PACE originators typically relied on automated valuation models rather than written appraisals. The equity that was assumed when the assessment was written may be looser than the HELOC lender’s own number.

5. Clear it. Request a payoff statement from the PACE administrator, pay it in full, and obtain the recorded satisfaction or release. Then re-submit the file with the updated tax bill and title report.

6. Re-run the line. With the assessment gone, the file is judged on the program’s ordinary terms: credit, CLTV, debt-to-income, vesting, and property type.

Lenders outside the network may handle a PACE balance differently. Treat that as the exception, and weigh it against the cost of simply paying the assessment off.

What Does the CLTV Math Look Like With and Without PACE?

Take a modeled rental. These are illustrative percentages, not market data. The first mortgage is 50% of the property’s value. A PACE balance is 8% of value. The investment line ceiling is 70% CLTV.

With the PACE balance counted, the combined stack is 58% before the new line. That leaves 12 points of value for the HELOC. Pay the PACE off first and the stack drops to 50%. The headroom becomes 20 points of value, subject to the line limits and the borrower’s other qualifying factors.

This is why payoff often comes first. The money used to retire the assessment is the same equity the line would have drawn on. Whether payoff makes sense depends on how large the balance is and what the other options cost.

The network’s investment line has these terms, subject to lender guidelines and full file review:

• Credit above the 700 floor buys eligibility rather than leverage, since a 720 score reaches the same ceiling as a 700.
• Primary residences can carry larger lines, but investment lines stop at the line maximum.
• A 50% maximum debt-to-income ratio applies.
• The structure is a five-year interest-only draw followed by a 25-year fully amortizing repayment. At least 75% of the line is drawn at closing.
• Single-family, 2-4 unit, PUD, townhome, and condominium properties, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural zoning are not offered.
• Availability in 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA.

Market-wide surveys report other numbers. For example, one lender’s guide says most lenders want a 700-720 score on an investment line.

Which Provider Types Handle PACE on a Rental?

There is no honest ranked list of providers for this situation, and any list that named companies would be guessing. The better approach is to sort by program type and ask what each does with a PACE balance.

A borrower shopping alone may burn applications before finding a program that fits at all. A broker that places files with several wholesale lenders can screen for the PACE problem, the vesting problem, and the property-type problem before any application goes in.

HELOC, DSCR Cash-Out, or Wait: What Does the Decision Look Like?

The decision turns on three things: how big the PACE balance is against the equity, how the property is titled, and whether the borrower wants a line or a lump sum.

A DSCR cash-out refinance can pay the assessment off at closing. Across most of the network it tops out around 75% LTV on a standard rental, with about six months of seasoning as the common expectation. Coverage of 1.00 is where select programs start, and sub-1.00 paths exist through select lenders with leverage and terms adjusted. Reserves commonly run around six months of PITIA but vary by lender, leverage, and loan size. DSCR compares rent to the full monthly obligation only. Clearing 1.00 does not mean positive cash flow, since repairs, vacancy, and management sit outside the calculation.

A DSCR loan may be made to an LLC-titled borrower, depending on program guidelines. That is a real difference from the HELOC, covered below. The complete DSCR loans guide walks through the full structure.

Where Does the Rule Break?

The general rule is simple: PACE must be gone before the line. These cases bend it.

LLC-held rentals. The investment HELOC requires title held by the individual borrower or a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A rental already deeded to an LLC needs a vesting change, or a DSCR cash-out refinance instead. Clearing PACE does not fix a vesting problem.

Solar leases and power purchase agreements. These usually leave no recorded lien on the property. They are a debt or review item, not a lien. A recorded solar deed of trust or a UCC fixture filing is a true lien and needs its own payoff and release. Do not assume that a solar label means PACE, or that it means safe.

Priority varies by jurisdiction. As summarized by Consumer Finance Monitor, the federal rulemaking describes the lien as typically having priority under state law. A file in a state where priority is weaker still gets treated cautiously, because the lender reads the tax bill and the title report, not the statute.

The federal rule left the priority problem in place. The rule brought PACE into ability-to-repay and disclosure requirements. The MBA and NCLC said in a joint statement that it leaves super-priority status intact, and that borrowers may still struggle to refinance or recoup their investment. American Banker’s report on the rule says PACE substantially raised borrowers’ property taxes. That raises the tax load, which feeds directly into a DSCR calculation and the rental’s cash flow.

Agency rules are a signal, not a rule here. Fannie Mae and Freddie Mac cannot buy loans on properties with a super-priority PACE lien. Investor HELOCs and DSCR loans are not agency products, so those rules do not govern them. They do show how the wider market views the lien.

Buying a rental that already carries PACE. Check the tax bill and the title report before closing. Negotiate the payoff into the purchase so the seller retires it at closing, or price it in.

How Do You Find the Right Provider for This Situation?

The best program for your file depends on the property, the equity, the vesting, and the credit profile. Lendmire is a mortgage broker, not a lender. It arranges home equity lines and DSCR loans through select wholesale partners and matches the scenario to the program that fits. That matters here because the lenders that will touch a PACE file, a non-warrantable condo, or a 2-4 unit differ from one another.

Before any application, screen for these:

• Does the program allow the assessment to stay, or is payoff required?
• Is the borrower an individual or a revocable trust, or is the rental in an LLC?
• Does the borrower own 15 or fewer financed properties? A borrower with more than 15 is not eligible for the line, and a borrower is limited to three lines in total.
• Is the property a type the program offers?
• Does credit clear the 700 floor?

Key Terms Defined

PACE assessment: A special assessment on the property tax bill that repays energy-related improvements, such as solar, and stays with the property.

Super-priority lien: A lien that ranks ahead of earlier recorded mortgages, typically through state law.

CLTV (combined loan-to-value): All loans secured by the property, divided by its value.

Payoff statement: A written figure from the PACE administrator showing what it takes to retire the assessment.

Release: The recorded document showing the assessment has been satisfied.

Vesting: How title to the property is held, such as an individual, a trust, or an LLC.

Next Step

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. An illustrative calculator on the site can give a rough sense of the combined leverage, but it is an estimate, not a quote.

Rental owners who find PACE on the tax bill early, and price the payoff into the plan, keep more options open than those who discover it after the application is filed.

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) arranging home equity lines of credit — primary-residence, second-home and investment-property lines — through a wholesale lending network in its 16 full-service states. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Mayer Brown’s analysis of the final PACE rule

2. CFPB — Residential Property Assessed Clean Energy Financing, proposed rule

3. Consumer Finance Monitor’s summary of the final rule

4. Better.com — HELOC on Investment Property

5. NCLC — Final PACE Rule Will Protect Homeowners, Improve Mortgage Performance

6. American Banker