The Quick Read: A solar lien does not change the VA’s maximum loan amount. The ceiling stays at 100% of the appraised value, financed funding fee included. What the lien changes is how much of that ceiling goes to payoffs, and whether the new VA loan can sit in first-lien position. Your cash in hand is the maximum loan, minus the old mortgage payoff, minus any solar payoff, minus the funding fee and closing costs. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
The Short Formula
Here is the whole idea in one line. Maximum new loan, minus everything that has to be paid off, minus the funding fee if you finance it, minus closing costs, equals your cash.
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.
Two limits set that maximum. One is the VA’s own ceiling. The other is the lender’s cap on its VA cash-out product. The lower of the two wins.
A solar payoff never shrinks the ceiling. It eats into the cash on a one-for-one basis. Pay off a large solar balance and a large first mortgage on a home with modest equity, and the cash can shrink to almost nothing.
Across the wholesale programs we place VA files with, a VA cash-out reaches 100% of the appraised value including the financed fee, subject to lender guidelines and full file review. It refinances any loan type into a VA loan. It also requires a net tangible benefit, which means the loan must clear at least one of VA’s eight listed benefit tests. The half-percent rate-reduction and fee-recoupment tests belong to the streamline (the IRRRL) and never apply here.
That is the program. Lendmire’s VA cash-out refinance program page covers the basics if you want the overview first.
What Does “Solar Lien” Actually Mean?
“Solar lien” is a catch-all. Your paperwork could mean any of five very different things, and the difference decides how the lien is handled at closing.
| Arrangement | What may show up | Typical handling |
|---|---|---|
| Owned outright | Nothing | No effect on the loan |
| Solar loan, equipment filing | State UCC-1 on the panels | Pay off or subordinate |
| Solar loan, recorded on the land | Fixture filing or deed of trust | Pay off or subordinate |
| Lease or PPA | Filing tied to the contract | Buyout, transfer, or title decision |
| PACE assessment | Charge on the property tax bill | Usually paid off at closing |
A few terms matter here. A UCC-1 is a public filing that tells the world a lender has a claim on specific equipment. A UCC-3 is the filing that ends it. A fixture filing is recorded in county land records and ties equipment to the real estate.
Start by pulling your solar contract, the note, and the security agreement. Those three documents tell you which row you are in.
Is a UCC Filing a Lien on the House?
Technically, no. It is a claim on the equipment. In practice, it can still cause trouble.
The CFPB’s solar financing issue spotlight notes that some solar loans are secured by a lien on the panels while others are unsecured. It also describes how a UCC lien can muddy title in some jurisdictions. When that happens, the lien has to be released or made subordinate to the mortgage or refinance.
The VA requires its guaranteed loans to be secured by a first lien, and the lender is responsible for securing that position. So the title company looks at the filing and decides whether it threatens that position. That decision is a title and lender call. It is general first-lien practice, not a published VA formula for solar.
No VA handbook passage addresses non-PACE solar filings by name. Treat anyone who quotes you a “VA solar rule” for UCC filings with some skepticism.
How the Loan Works, Step by Step
Step 1: Identify the instrument. Match your documents to the table above.
Step 2: Search title and UCC records. The title commitment shows recorded liens, including county fixture filings. A state-level UCC-1 on equipment alone may not appear there, so a separate UCC search is the safeguard.
Step 3: Pick the lien’s fate. There are three paths:
- Pay it off at closing from loan proceeds. A VA cash-out can refinance a mechanics lien, a second mortgage, or any other recorded lien. A UCC-3 termination follows for UCC filings.
- Subordinate it, meaning the solar company agrees to rank behind the new VA loan. Lenders generally expect other lienholders to do this.
- Leave it in place, but only if title confirms in writing that it does not impair first-lien priority.
Step 4: Appraisal. The lender orders it, and VA sets the reasonable value. The 100% test runs against that value. Do not count on the appraiser adding value for owned panels. Any credit for solar depends on the appraiser and the market, not on a set dollar amount.
Step 5: Net tangible benefit. Every VA cash-out has to show a benefit to you and carry the required disclosures. VA Circular 26-19-05 confirms that benefit standards apply to all cash-out loans.
Step 6: Underwriting. Full credit underwriting applies to every cash-out. Residual income is the controlling test. That is the money left each month after taxes, housing costs, debts, and a living allowance for your family size and region. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table.
Here is where solar shows up. A solar payment that continues counts as a debt. A solar payment paid off at closing drops out of your obligations, which can help residual income. The lender decides how any remaining solar obligation enters the numbers.
Step 7: The arithmetic. Maximum loan, minus first-mortgage payoff, minus solar payoff, minus the funding fee if financed, minus allowed closing costs. What is left is yours.
The 100% Ceiling and Why Solar Doesn’t Move It
Circular 26-19-05 says the VA no longer guarantees a refinance when loan-to-value goes above 100%. LTV is the total loan, funding fee included, divided by the reasonable value. A financed fee cannot push the loan over that value.
That is the ceiling. Nothing about solar raises it or lowers it.
Many lenders set a lower cap of their own on cash-out loans, and some set a higher credit floor than the wholesale programs we use. That cap is a lender choice, not a VA rule. So “the VA caps cash-out at 90%” is a common misconception. A 90% LTV happens to be one way to meet a net tangible benefit test, which is probably where the confusion starts.
The Funding Fee Is Part of the Math
The VA’s cash-out funding fee is 2.15% on first use and 3.3% after first use. Per the VA’s funding fee page, it does not change with down payment on refinances. The fee can be financed into the loan, and it is waived for veterans who receive compensation for a service-connected disability and for the other exempt groups.
Why this matters with solar: the fee is a percentage of the loan. Roll a solar payoff into the loan and the loan gets bigger, so the fee gets bigger too. Because the fee counts inside the 100% test, a larger fee leaves less room for cash.
Worked Example: Two Homeowners, Same Home
These scenarios use modeled assumptions, expressed in percentages rather than dollars. They are illustrations, not quotes.
Homeowner A has plenty of equity. The home appraises at some value, and the existing mortgage is around 55% of it. Take the ceiling at 100%, subtract the 55% mortgage and the 6% solar balance, then subtract the funding fee and closing costs, which together might run a few percent. Roughly a third of the home’s value remains as cash, subject to the lender’s own cap on VA cash-out loans.
Homeowner B has thin equity. The existing mortgage is near 88% of value, and the solar balance is about 8%. The two payoffs already total 96%. The funding fee and closing costs take most of the remaining 4%. The cash in hand is close to zero. The loan may still make sense if it removes a monthly solar payment and passes the net tangible benefit test. If not, cash-out is the wrong tool.
Both examples show the same rule. The solar payoff reduces cash dollar for dollar. It never reduces the ceiling.
PACE: The Hard Case
PACE is a different animal. A PACE assessment is repaid through your property tax bill, and its lien can outrank a mortgage. The U.S. Treasury’s consumer guide on solar panels notes that a PACE tax lien takes priority over the home mortgage, and that some mortgage contracts do not allow that lien to be added.
VA’s PACE circular says a VA-guaranteed loan must be secured by a first lien. A property with PACE can be eligible if the lender confirms the PACE lien is not superior to the VA loan for the full PACE obligation. The property may still face a superior claim for delinquent regularly scheduled installments. How the lender confirms that is a lender and title decision.
In practice, if a state’s PACE lien cannot be subordinated, the usual route is paying it off at closing. A cash-out can do that. A streamline cannot.
Paying off PACE removes that added tax charge.
Leases and PPAs
A lease or power purchase agreement is not a loan, so there is nothing to pay off in the usual way. The lender and title company have to decide whether to subordinate the filing, have the lease transferred or bought out, or leave the filing as is. Expect a lender to want the lease, the filing, and a statement from the solar company.
Where the General Rule Breaks
- The streamline cannot clear a solar loan. An IRRRL cannot refinance other liens, so a solar loan cannot be paid off in one. Only a cash-out can.
- Seasoning applies only to VA-to-VA cash-outs. It does not apply when paying off non-VA loans or other lien debt. A solar payoff alone does not trigger it. Where seasoning does apply, it is the later of 210 days from the first payment and the 6th payment.
- Occupancy matters. VA requires you to live in the home. A cash-out on a property you do not occupy does not fit the program. If the home is a rental or second home, the VA program is the wrong fit.
- Energy-efficiency financing is separate. VA allows some energy-efficiency costs to be financed. Ask a loan officer to confirm the current limit before counting on it.
- Credit floors vary. The wholesale programs we use start at a 580 decision score. VA itself sets no minimum, and some lenders set a higher floor.
Pay It Off First, or at Closing?
Paying the solar loan from cash-out proceeds keeps your savings intact. It also grows the loan, and with it the funding fee. Paying it down first with savings keeps the new loan smaller, but it costs you liquidity.
The stronger play is usually to roll it in when equity is comfortable and the monthly savings from removing the solar payment are real. When equity is thin, paying down first, or skipping the cash-out, can be the better call. This one is a genuine toss-up, and it depends on how much cash you want to keep on hand.
Payoff letters, lien releases, and subordination agreements all depend on the solar company’s response. Ask for the payoff figure early. Do not assume timing.
Documents to Gather
- The solar contract, note, and security agreement
- Any lease or PPA, plus related recorded filings
- A current payoff statement from the solar company
- The title commitment and a UCC search result
- Your Certificate of Eligibility
- Your current mortgage statement
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Cash-out refinance: A new loan that replaces your current one and pays out the difference between the new loan and what you owe.
UCC-1: A public filing that tells the world a lender claims specific equipment, such as solar panels.
UCC-3: The filing that ends a UCC-1 after a payoff.
Fixture filing: A filing recorded in county land records that ties equipment to the real estate.
PACE: A financing program repaid through the property tax bill, with a lien that can outrank the mortgage.
Subordination: An agreement that a lienholder will rank behind the new loan.
Payoff letter: The solar company’s written statement of what it takes to clear the debt.
Frequently Asked Questions
Does a solar loan reduce the maximum VA cash-out loan?
No. The ceiling is 100% of appraised value, financed funding fee included, no matter what liens exist. The solar payoff reduces your cash instead. Each dollar paid to the solar company is a dollar you do not receive.
Can I use a VA cash-out to pay off my solar loan?
Yes, generally. The VA’s handbook allows a cash-out to refinance any recorded lien, and it can refinance any loan type into a VA loan. Whether the loan is approved depends on lender guidelines, full credit underwriting, residual income, and the net tangible benefit test.
Will the appraisal add value for my solar panels?
Not reliably. No VA source sets a dollar value for owned panels. The result depends on the appraiser and the local market, so do not build your cash estimate around a solar credit.
Do I have to pay off a solar lease?
Not necessarily. A lease or PPA is not a loan, so the lender and title company decide whether to subordinate, transfer, buy out, or leave the filing. There is no VA-specific rule, so expect the answer to vary by lender.
What if I only have a little equity?
Add up the first-mortgage payoff, the solar payoff, the funding fee, and closing costs against the 100% ceiling. If they use up nearly all of it, little or no cash remains. Whether the loan still makes sense depends on the net tangible benefit and your monthly budget.
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. All figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
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.
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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
1. CFPB Solar Financing Issue Spotlight
3. VA.gov – Funding fee and closing costs
4. U.S. Treasury’s consumer guide on solar panels
5. VA Circular 26-16-18, PACE Loan Processing
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: VA Cash-Out vs Adding a Spouse to Title on a Home Bought Before Marriage · How to Qualify and Apply for a VA Cash-Out Refinance to Tap Home Equity · How Much a VA Appraisal Value Caps a Cash-Out Loan
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.