The Quick Read: It depends on the type of lien and on what the appraiser finds. Neither a solar lien nor an unpermitted addition is an automatic bar. A VA cash-out can pay off most liens at closing, as long as the new VA loan records in first position. An unpermitted addition is a property-condition and value question, and it can shrink the cash you walk away with. Every point here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
What Actually Decides the Outcome?
Four things decide it: where the lien sits in line, whether it gets paid off or released at closing, what the appraiser says about the property, and whether the numbers still work after payoffs and fees.
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: 7.24% as of October 29, 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.
Most people expect the solar lien to be the deal-killer. It usually isn’t. A VA-guaranteed loan must be secured by a first lien on the property, and the lender has to secure that position, per VA Circular 26-16-18. So the real question is simple. Can the solar obligation be cleared, or does it sit ahead of the new loan?
A cash-out refinance is built for this. The new loan pays off the old one, and it can pay off other liens in the same transaction. Lendmire’s VA cash-out refinance program page covers the basics of how that works. Across the wholesale programs Lendmire places VA files with, the pattern is consistent: a lien you can pay off is a lien you can usually close around.
Which Kind of Solar Setup Do You Have?
The solar contract matters more than the solar panels. There are four common structures, and each shows up differently on title.
| Solar structure | What it is | Typical handling at closing |
|---|---|---|
| Equipment filing (UCC-1) | Lien on the panels only | Payoff or release letter |
| Recorded deed of trust or fixture filing | Lien on the real estate | Payoff, release or subordination |
| PACE assessment | Repaid on the property tax bill | Depends on lien priority |
| Lease or PPA | You rent the system | No value given; contract review |
Start by asking the solar company for the contract, the note and the security agreement. Those papers tell you which row you are in.
An equipment filing. The U.S. Treasury’s consumer guide on buying solar panels tells buyers to find out whether financing includes a lien on the solar system. These liens, often called UCC-1 filings, can affect whether a buyer wants the home. VA has no published rule that speaks to equipment-only filings. In practice, how a lender treats one varies. Many want a payoff or a release in hand.
A recorded lien on the real estate. This one must be paid off, released or subordinated so the new VA loan records first. A cash-out pays it off from proceeds.
A lease or power purchase agreement. You can’t pay off a lease the way you pay off a loan. VA’s Lenders Handbook gives no value to leased equipment, including leased solar. The panels may stay on your roof, but the appraiser won’t count them. The lender will also review the lease terms, and the payment may count as a debt. This is the one structure where a payoff may not be an option, so ask the lender early what they need.
What About PACE Solar Financing?
PACE gets its own answer, because it is repaid through your property tax bill and can take priority over your mortgage. The Treasury guide says plainly that a PACE tax lien takes priority over the home mortgage.
VA does have a dedicated path. Under Circular 26-16-18, a property with a PACE obligation may be eligible for VA financing if the lender determines the circular’s conditions are met. One condition is that no claim superior to the VA loan can exist for the full outstanding PACE balance. A PACE lien with super-priority for the full balance has to be paid off or restructured.
That makes VA more flexible than conventional programs on this point. Fannie Mae’s Selling Guide generally requires borrowers with enough equity to pay off an existing PACE obligation, and won’t buy loans on such properties unless the PACE terms give no lien priority over first mortgages. The same house can get different answers under different programs.
PACE is also worth a hard look on cost. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review. For some owners, rolling a PACE balance into a VA cash-out is the cleanest exit. That is a judgment call about your budget, not a recommendation.
How Does a VA Cash-Out Handle the Solar Payoff?
The solar balance is paid from the loan proceeds at closing, and the cash you receive is what is left after payoffs, fees and closing costs. Here is the mechanical order.
1. Eligibility. You need a VA Certificate of Eligibility (COE), and you must live in the home. VA also looks for satisfactory credit and enough income, per VA’s cash-out page.
2. Title and lien search. Title work shows every recorded lien, so nothing surprises you late.
3. Payoff request. The lender asks the solar company for a payoff statement.
4. Appraisal. The lender orders it. More on that below.
5. Underwriting. Residual income, meaning what’s left of your income after the major bills, is the controlling test. Across the wholesale programs Lendmire places files with, the decision-score floor starts at 580, and the 41% debt-to-income figure is a guideline rather than a cap. A ratio above it needs residual income well above the table.
6. Closing and recording. The new VA loan must record in first position.
If the solar loan stays in place, its payment counts as one of your debts. If you pay it off, that payment leaves your debt picture, but the balance joins your new loan.
One more test applies. Every VA cash-out must show a net tangible benefit, meaning the refinance has to help you in one of VA’s listed ways. Under Circular 26-19-05, that applies to all cash-outs. Paying off solar is not itself one of the listed benefits, so the refinance has to meet one of the tests on its own terms.
What Does an Unpermitted Addition Do to the File?
It can lower the value, trigger repair conditions, or both. VA has no blanket “permit required” rule, and that surprises many borrowers.
VA’s Minimum Property Requirements, covered in Chapter 12 of the Lenders Handbook, cover safety, soundness and sanitation. The scope also includes the property’s location and legal considerations. The handbook ties the outcome to local code enforcement. Where the local authority enforces code at sale, the handbook’s example is removing the unpermitted improvements. So treatment can differ from one jurisdiction to another.
The answer is assembled from the property requirements and local-code language, and lenders can add stricter rules of their own. Ask early what yours requires.
In practice, one of three things tends to happen:
- The appraiser gives the unpermitted space little or no value.
- The appraisal comes back subject to repairs or a code-compliance fix.
- The lender asks for a retroactive permit or a code-compliance letter before going forward.
A VA appraisal is not a home inspection. It checks the property requirements and estimates value. It doesn’t walk through every system the way an inspector does.
When the Solar Lien and the Addition Collide
Together, the two problems squeeze your cash from both sides. The addition lowers value. The solar payoff comes off the top. Both hit the same closing.
| Item | Addition permitted or not counted | Addition unpermitted, repairs required |
|---|---|---|
| Solar loan paid off | Usually workable | Payoff plus repair costs shrink cash |
| Lease or PPA | Lender reviews lease | Two open items; longest path |
| PACE with super-priority | Payoff or restructure needed | Two open items; plan for less cash |
Here is a hypothetical, with no dollar amounts. Say you own a home with a finished addition that has no permits. The appraiser excludes that addition from the appraised value because it has no permits. The VA cash-out can reach 100% of the appraised value, including the financed funding fee. So the lower value lowers your ceiling. Then the solar payoff, the funding fee and any permit or repair costs come out of what remains. Cash in hand can be small, or the numbers may stop working entirely.
Another wrinkle: sometimes the solar installation itself was never permitted. Then the same title and code review that touches the addition can touch the panels too. Flag it early.
Contractors add one more risk. An unpaid contractor on an unpermitted addition can leave a mechanics lien on title. That is a separate title problem, and a title search is what finds it.
What Does It Cost to Do This?
The cash-out funding fee is 2.15% for first use and 3.3% after first use, and it doesn’t change with down payment, per VA.gov. It can be financed, and veterans receiving compensation for a service-connected disability, along with other exempt groups, don’t pay it.
Add payoff amounts and any permit, repair or inspection costs on top. Paying off liens and the fee reduces your leftover cash. A repair condition or an excluded addition can lower value, which lowers cash again.
What If the Numbers Don’t Work?
You have options, and none of them is a failure.
- Pay the solar loan down or off first with outside funds, then refinance.
- Keep the solar loan and refinance without touching it, if the lien isn’t ahead of the new loan.
- Cure the permit issue with a retroactive permit, a code-compliance letter, or removal of the work.
- Skip the addition’s value and size the loan to the appraised value without it.
- Use a different refinance type. A VA streamline, known as an IRRRL, can’t pull cash out. It is for lowering the cost of an existing VA loan, and it needs no VA appraisal. It’s no fix for a lien problem when you want equity, but it may fit if cash isn’t the goal.
Key Terms Defined
Lien: a legal claim against your property that must be settled before it can be sold or refinanced cleanly.
First lien position: being first in line to be repaid if the home is sold to settle debts. VA requires its loan to be there.
UCC-1 filing: a public notice that a creditor has a claim on equipment, such as solar panels, rather than on the real estate.
PACE: a financing program that repays solar or similar upgrades through your property tax bill.
Net tangible benefit: a test showing the refinance helps you in a way VA lists.
Residual income: the money left from your income after major bills and taxes, which is VA’s controlling underwriting test.
Minimum Property Requirements: VA’s standards for safety, soundness and sanitation that a home must meet.
Frequently Asked Questions
Can I refinance with a solar lien still in place?
Sometimes. It depends on whether the lien sits ahead of the new VA loan. If it does, it must be paid off, released or subordinated. A lien that isn’t superior may be able to stay, subject to lender guidelines.
Does a leased solar system hurt a VA cash-out?
It doesn’t add value. VA’s handbook gives no value to leased equipment, including leased solar. The lender will also review the lease, and the payment may count toward your debts. A lease can’t be paid off like a loan, so ask the lender early.
Does paying off the solar balance reduce my cash out?
Yes. The payoff comes out of the loan proceeds, along with the funding fee and closing costs. The more the lien, repairs and fees take, the less cash remains.
Will VA refuse an addition with no permit?
Not automatically. VA ties the result to local code enforcement and the appraiser’s findings. The addition may get no value, or the appraisal may require repairs. Lender rules can be stricter than VA’s.
Can I use a VA streamline instead?
Only if you don’t need cash. An IRRRL can’t pull equity out, and it requires an existing VA loan. If you want cash or want to move from another loan type into VA, cash-out is the route.
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 licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For current guidelines, see VA loan programs.
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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. U.S. Treasury: Before You Purchase and Finance Solar Panels
5. VA Circular 26-19-05 (Cash-Out Refinance)
6. Chapter 12 of the Lenders Handbook
7. VA.gov: Funding fee and closing costs
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: Can a Veteran’s Family Qualify for a VA Cash-Out Refinance? · Best VA Cash-Out Refinance Program Without Monthly PMI · VA Cash-Out vs Conventional Cash-Out for a Veteran: What Decides
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.